IBA Annual Report 2009 by The Crew Communication

Strengthened to take on the future Annual report 2009

Jean-Marc Bothy Chief Financial Officer Ph.: +32 10 47 58 90 E-mail: investorrelations@iba-group.com Version franĂ§aise disponible sur demande.

IBA Group | 2010 | AR2009

IBA Contact

Ion Beam Applications, S.A. Chemin du Cyclotron, 3 1348 Louvain-la-Neuve, Belgium Ph.: +32 10 47 58 11 â&#x20AC;&#x201C; Fax: +32 10 47 58 10 RPM Nivelles - VAT BE 428.750.985 E-mail: info-worldwide@iba-group.com Website: www.iba-worldwide.com Published by IBA S.A., Chemin du Cyclotron, 3 1348 Louvain-la-Neuve, Belgium.

This brochure is printed on ECF wood-free coated paper. It was produced with plants that comply with ISO 14001, the environmental management standard.

IBA Annual report 2009

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Founded in Louvain-la-Neuve, Belgium, in 1986, IBA develops and markets advanced technologies, pharmaceutical products and tailored solutions for the healthcare sector, with emphasis on cancer diagnosis and therapy. Leveraging its scientific expertise, IBA is also active in the sterilization and ionization field. IBA is quoted on the pan-European EURONEXT exchange and included in the Bel Mid index. (IBA: Reuters IBAB.BR and Bloomberg IBAB.BB) Key elements in 2009: Sales increased by 8% and reached EUR 359.2 million. The year closed with a net loss of EUR 12.3 million resulting from one-off charges on two R&D projects. This charge had a heavy impact on 2009 results but will not negatively affect future IBA performance. Pharmaceuticals: ➤ Progress in the development of two new molecules: Redectane® and Aposense®. ➤ Positive assessment from the Committee for Medicinal Products for Human Use (CHMP) for Scintimun®. ➤ Working agreement concluded with EczacıbaşiMonrol Nuclear Products A.S. ➤ Partnership with BV Cyclotron VU for the production and distribution of radiopharmaceuticals in The Netherlands. ➤ Cisbio Bioassays received the 2009 Frost & Sullivan Technology Innovation of the Year Award. Equipments: ➤ In proton therapy, two centers were sold: in Prague, Czech Republic, and in Trento, Italy. ➤ Launch of more accessible proton therapy centers (“Proteus Nano”). ➤ Sale of 14 particle accelerator systems. ➤ Launch of new Cyclone® 11 cyclotron. ➤ Launch of versions of Compass® and MatriXXEvolution suitable for rotational radiotherapy equipment.

Introduction

Table of Contents 02 04 05 05 08 10 14 16 30

Key figures Highlights 2009 Message from the Chairman and the CEO Returning to a positive outlook in 2010 Human resources Research and development Geographical presence Management report IFRS consolidated financial statements for the year ended December 31, 2009 32 Statement of consolidated financial position 33 Consolidated income statement 34 Consolidated statement of comprehensive income 35 Consolidated statement of changes in shareholders’ equity 36 Consolidated cash flow statement 37 Notes to the consolidated financial statements 98 Auditor’s report on the consolidated financial statements 102 IBA S.A. annual financial statements 106 Corporate governance, management, and control 116 General information 122 The stock market and shareholders

IBA annual report 2009 | 1

Key figures 2005 (EUR ‘000)

2006 (EUR ‘000)

2007 (EUR ‘000)

2008 (EUR ‘000)

2009 (EUR ‘000)

CAGR (%)

Sales and services Gross margin REBITDA(1) REBIT(2) REBIT/Sales and services Net profit Capital expenditure Research and development expenses

136 099 43 855 11 118 3 095 2.3% 3 048 6 788 9 689

170 257 53 345 17 963 9 769 5.7% 29 989 13 585 10 028

213 849 69 845 18 269 11 788 5.5% 13 846 23 772 17 167

332 607 112 335 26 143 10 751 3.2% 5 329 33 701 27 001

359 161 131 311 25 433 7 306 2.0% -12 293 31 328 28 982

27.5% 31.5% 23.0% 24.0%

Equity Net cash position Current liabilities Total assets Return on equity Return on capital employed (ROCE)

103 877 18 297 58 623 202 755 2.9% 2.1%

136 329 43 996 78 767 266 868 22.0% 5.2%

141 481 32 028 118 658 324 438 9.8% 5.7%

152 366 17 806 200 914 510 695 3.5% 3.5%

144 142 -17 061 177 543 479 643 -8.5% 2.4%

8.5%

7.65 24 842 453 0.12 62.35 190 045 4.18 0.00

18.36 25 465 066 1.18 15.59 467 539 5.35 0.00

19.00 25 800 252 0.54 35.40 490 205 5.48 0.17

7.75 26 563 097 0.20 38.63 205 864 5.74 0.08

8.45 26 719 155 -0.46 -18.37 225 777 5.39 0.00

2.5% 1.8%

171 748 15.4

423 543 23.6

458 177 25.1

188 058 7.2

242 838 9.5

9.0%

900

1 076

1 360

2 067

1 988

21.9%

2005 (EUR ‘000)

2006 (EUR ‘000)

2007 (EUR ‘000)

2008 (EUR ‘000)

2009 (EUR ‘000)

CAGR (%)

Sales Pharmaceuticals

45 713

66 087

78 265

149 971

203 587

45.3%

Proton therapy Dosimetry Other accelerators

27 190 28 031 35 165

32 539 31 570 40 061

59 343 35 240 41 001

86 191 37 557 58 888

70 689 39 815 45 070

27.0% 9.2% 6.4%

4 545 7 640

247 9 522

3 205 8 583

2 918 7 833

1 135 6 171

-5.2%

Share price at December 31 (Euro) Number of shares Net earnings per share (Euro per share) Price/Earnings Market capitalization Book value per share (Euro per share) Dividend per share Enterprise value EV/REBITDA Employees at December 31

46.6% 31.5%

31.9% 24.0%

4.4% 6.6%

Sales trends by business unit

Recurring operational profit/(loss) Pharmaceuticals Equipments

(1) REBITDA: Recurring earnings before interest, taxes, depreciation, and amortization. (2) REBIT: Recurring earnings before interest and taxes.

2 | IBA annual report 2009

Key figures

Sales trends

R&D 2009

(EUR ‘000)

26 % ls tic a Ph

300 000 300000

✖ Other accelerators ✖ Dosimetry ✖ Proton therapy ✖ Pharmaceuticals

400 000 400000

200 000 200000

74%

100 000 100000

ent

ipm

Equ

0 2005

2006

2007

2008

2009

Sales trends by geographic sector 2005 USA

ROW

(%)

55 45

2006

(%)

49 51

USA

ROW

2007 USA

ROW

(%)

55 45

2008 USA

ROW

(%)

40 60

2009 USA

ROW

(%)

30 70

Change in number of employees and employee distribution worldwide Employee distribution worldwide

2 100 2100

W RO

28 %

sia 6% A

7 % 8 % G e

Change in number of employees

r ma

1 800 1800 1 500 1500 1 200 1200

900 900 600 600

lg Be ium

% 20

% 31

a Fr

300 300 00

2005

2006

2007

2008

2009

IBA annual report 2009 | 3

12 200

11 200

Highlights 2009

10 2

009

09 2

009

✖ December 3, 2009 IBA and AtreP sign a contract to open the 1st Gantry Equipped proton therapy center in Trento (Italy) ✖ October 6, 2009 Last patient treated in the REDECTANE® phase III registration trial

✖ December 4, 2009 IBA prevails in first instance in its cancellation claim of the proton therapy contract of Skandion in Sweden

08 2

009

✖ October 29, 2009 IBA receives positive opinion for Scintimun®

07 2

009

✖ December 18, 2009 The EIB provides IBA with EUR 50 million for R&D projects in the fields of cancer diagnosis and therapy

200

✖ October 29, 2009 IBA launches MaxiPRO, an innovative rental solution

200

09 ✖ July 26, 2009 IBA Dosimetry launches new 3D water phantom

✖ May 8, 2009 IBA sells a proton therapy system in Prague

✖ November 2, 2009 Proteus Nano, the New Two-Room Solution from IBA

✖A ugust 27, 2009 IBA and ProCure set new world record in proton therapy, opening the Oklahoma Center nine months ahead of standard schedule.

✖A ugust 28, 2009 IBA and Eczacıbașı-Monrol realized the first major step of the MOU signed in February. Eczacıbașı-Monrol placed an order for 4 IBA Cyclone® 18 systems.

0 20

✖M arch 24, 2009 IBA sells a new version of its famous Cyclone 30® in Germany

08 20 10

008

09 2

✖M ay 29, 2009 IBA and BV Cyclotron VU extend partnership in PET tracers supply

4 | IBA annual report 2009

✖ September 21, 2009 IBA and APOSENSE sign strategic collaboration

Peter Vermeeren Chairman of the Board of directors (right) Pierre Mottet Chief Executive Officer (left)

Message

➤

Message from the Chairman and the CEO Returning to a positive outlook in 2010, after a frustrating 2009 The year 2009 will be remembered for its economic crisis, although IBA prepared well for the situation and made significant provisions for it. The year nevertheless ended with a loss due to one-off charges against two R&D projects which have a heavy impact on last year’s results but will not adversely affect future IBA performance. A mixed result therefore, but heralding in a much brighter outlook for 2010, following stronger equipment orders at the end of 2009. With the order book currently standing at more than EUR 200 million, there are positive signs and we can look forward to the future with more confidence.

What conclusions will you draw from last year and how do you see 2010? I am not going to say that we are at the end of the tunnel but there are encouraging signs as far as project financing is concerned. The second half of 2009 saw us return to our previous levels with the sale of 14 accelerator systems and two proton therapy systems. So 2010 has started on a solid platform. Part of our objectives has already been achieved with a proton therapy center order from the ProCure Proton Therapy Center of Somerset, New Jersey, USA, signed and entirely financed. The trend is positive. Of course, the strength of recovery in the American pharmaceutical market still has to be confirmed. Having said this, everybody seems to share the belief in a rebound; and 2010 looks better than 2009. We should also note that the unstinting focus on cancer in public health policies is a favorable sign for this industry.

What do you consider to be the most important facts of this atypical year? Principally, the progress we have made in the development of two new radiopharmaceutical molecules in Positron Emission Tomography (PET): Redectane® and Aposense®. The first, a marker which will lead to major advances in the diagnosis of renal cancer, obtained Phase III in October after successful clinical tests on 226 patients. The second is a new agent for the molecular imaging of apoptosis (or programmed cell death). Cooperation agreed last September between IBA and Aposense Ltd will enable this radiotracer to start the clinical trial phase with a strong chance of success. Aposense® detects the biological process of programmed cell death at a very early stage. The outcome is a new generation of tracers that will advance even further the diagnosis and treatment of diseases, especially cancer. On October 29th IBA received a positive assessment from the Committee for Medicinal

IBA annual report 2009 | 5

Products for Human Use concerning authorization for the market introduction of Scintimun®. This product will be used in scintigraphic imaging for the detection of certain inflammations and infections. The strategy of partnerships seems to be paying off. Where are you today? On a strategic level, two partnerships signed in the first six months of 2009 enable our customers to benefit from a network of 50 PET radiopharmaceutical production and distribution sites on three continents. I am thinking particularly of the agreement made in February with the company Eczacıbaşi-Monrol Nuclear Products A.S. to develop the PET radiopharmaceutical and SPECT (Single Photon Emission Combined Tomography) market in the Balkans, the Middle East and North Africa, as well as in Central and Eastern Europe. In May we also tied up a partnership with Cyclotron VU BV, based in Amsterdam, for the production and distribution of Fluor-18 marked radiopharmaceuticals used in PET. Lastly, I don’t want to end the summary of our pharma business without mentioning that the Cisbio Bioassays division received the 2009 Frost & Sullivan Award for Technology Innovation of the Year. This award shows once again the esteem in which IBA is held for its research performance, irrespective of the sector. Our efforts are still, more than ever, focused on research and innovation. In proton therapy I would like to mention the sale of two centers, one in Prague and the other in the new hospital in Trento, in the north-east of Italy. Finally, we have launched smaller proton therapy centers (“Proteus Nano”) in order to make this form of treatment more accessible by providing even more cost efficient solutions.

6 | IBA annual report 2009

Does your development and innovation strategy also carry some risks? There is an inherent risk in being active in emerging technologies. Nevertheless, innovation is the element that enables us to look at the future with confidence, thanks largely to our reorientation towards the development of new proprietary molecules that are highly promising, both for patients and health insurance systems. So yes, we can have technological crises. Breakthrough products sometimes create unforeseen extra costs, but everyone knows that this is the name of the game. These last few years the company has considerably increased its investment in R&D in order to maintain its technological leadership in an increasingly competitive environment. This is especially true in the areas of proton therapy and molecular imaging equipment. During the first few weeks of 2010, as part of the preparation of our annual accounts, we had a very close look at the valuation of outstanding costs and probable delays in the completion of our high-value technological projects, particularly those which include worldfirsts. We concluded from this examination that we would be unable to prevent significant additional costs in the completion of two of these projects. It is in a way the price for our long-term insurance! Because for us, in terms of innovation our worldfirsts represent the best possible business showroom. We should put these costs in context: our debt is low, our financial capacity is solid and the European Investment Bank has just granted us a EUR 50 million loan. Remember too that 70% of our turnover is generated by recurrent contracts and that we plan to start paying dividends again in 2011. Speaking of the future, will the focus remain on cancer? Or will we see a move towards other markets? Oncology remains our positioning, absolutely. This is the sector in which we are the most socially useful. The market is in a process of consolidation, especially proton therapy. One could say that the oncology field is currently in a transition phase,

Message

where we are marketing our established portfolio but with the knowledge that two advanced products will arrive in 2011 and 2014, for which we are already preparing the ground. These two proprietary molecules appearing on the horizon are also linked to the progress of our research on cancer treatment. In this way we can ensure that we retain leadership in the sector while continuing to increase our bottom line net margin. This is where the real challenge lies. We are contributing to creating the medicine of tomorrow, characterized by a personalized approach and many complementarities between our various activities. We believe that this strategy is vital in order to advance the fight against cancer, with evermore effective treatments and ever-declining social costs. IBA is a key player in this movement. We aim to expand this market within a five-year period; our capacity to develop high added value competitive products justifies this approach. If you consider our recurrent turnover, our innovations ready for market and the richness of our pipeline, we are ready to conquer and consolidate in the short-, medium- and long-term. The future will depend more and more on the work of our teams â&#x20AC;&#x201C; men and women whom I congratulate here and now for their exemplary commitment in the battle against cancer. Finally, I would also like to thank all our shareholders for the confidence they have shown in IBA. This enables us to continue the fight with energy and determination!

IBA Annual report 2009 | 7

Human resources A robust HR structure and systems to develop employees for the challenges ahead. As a global company growing strongly, the IBA Group has to ensure that all its employees are ready and equipped to meet the challenges created by constant technological change. Only by achieving this can the company fulfill its ambitious mission to protect, enhance and save lives. To help meet the Group’s strategic objectives, Human Resources has developed a two-fold strategy: on the one hand, the development of employee skills and on the other, the implementation of robust transversal systems and processes to support staff across the company. The deployment of these two directions is now building a solid foundation for the Group’s future development. This strategy, aimed at strengthening both resources and structures, proved even more essential in the uncertain economic climate of 2009. During the year, the IBA HR team faced a double challenge. Firstly, following the acquisition of CISBIO in 2008, IBA had to integrate the management of 600 new employees into Group systems and structures without disrupting service quality. Secondly, there was the need to develop human talent and prepare personnel for the future expansion anticipated after last year’s economic downturn. 2009 was therefore a period for constructing a solid HR foundation from which to launch into the future.

8 | IBA annual report 2009

A structure for growth: HR organization aligned with strategic objectives The operational structure of IBA Business Units, heavily decentralized and located in numerous countries around the world, has necessitated the creation of a two-dimensional HR service structure: 1. The HR Business Partners within the Business Units, functioning as an integral part of each activity: their role is to translate Group strategy into a long-term HR plan for their respective Business Units and build the annual plans which will be implemented by Shared Services. 2. A team of Shared Services: organized by geographical zone, this group carries out the principal operational and transactional HR activities. On a corporate level, it establishes the group’s major common processes: ➤ HR data administration ➤ Personnel development and training ➤ Compensation, Pension and Benefits ➤ Recruitment This HR organization responds to current needs and anticipates, in a flexible manner, the expected growth of activities in the years to come.

A new HR tool accessible to every employee, for maximum transparency Since the end of 2009, employees have access to a secure IT environment in which they can, in real time, consult or update their personal data, complete annual and half-yearly evaluations, access the setting of their individual objectives and make requests for training. This tool offers every member of the staff a transparent view of their individual objectives’ contribution to the strategy of their Business Unit and the IBA Group.

Attract top-level talent and strengthen company culture Maintaining leadership in IBA’s areas of activity depends on the capacity of its personnel to continually innovate in future technologies and transform these technologies into services and products with high added value for its customers. Attracting and retaining the best talent is therefore essential. This is why IBA considers it a priority to offer employees an extremely stimulating work environment, where team work is central. Likewise the high level of responsibility offered even to junior managers. Finally, with offices in 13 countries on 3 continents, IBA offers a very rich cultural diversity – representatives of 40 different nations work at IBA in the fight against cancer. Internal employee mobility is strongly encouraged and formalized by a HR process designed to make movement easy, both internationally and between different activities of the Group. In 2009, one third of employee promotions involved a transfer between Business Units. This policy helps to enrich and strengthen a common Group culture and offer employees new opportunities for development.

Development of employee skills The IBA strategic plan has clearly identified that successful future growth is dependent on an immense effort dedicated to creating the necessary management skills and providing the training demanded by employees and the needs of the business. To achieve this, IBA initiated two training and skillsdevelopment programs in 2009. ➤ IBA Leadership Academy: a program enabling managers to develop their management and team leadership skills. ➤ IBA Efficiency@Work: a program of concrete management tools to help Group managers optimize their work efficiency, whether working in teams or individually. The complete program, which was piloted in 2009, will be deployed for all managers and employees throughout the Group over a period of 4 years.

IBA annual report 2009 | 9

Human resources

HR transversal processes to ensure optimal service quality to employees throughout the Group The transformation and deployment of common Group HR systems and processes were pursued throughout 2009 and are due to be completed by the end of the first half of 2011. In addition, the management of employee data in a standardized HR online system has now been established. Various procedures have been simplified and formalized, notably in the areas of recruitment, international mobility and performancemanagement programs.

Research at IBA in 2009 In spite of the economic crisis, IBA allocated a 2009 R&D budget at the same level as that of 2008: EUR 29 million (8% of annual revenue), in order to maintain technical leadership in all its markets. In 2009, approximately 11% of the Group workforce was employed in R&D functions. The development quality and capacity of the company is well established. Major Belgian and European players in research funding support IBA, as illustrated by the EUR 50 million loan provided by the European Investment Bank (EIB) for the company’s research efforts. Other examples of this support include the three new research projects in the EU 7th Framework Program and the three joint R&D projects endorsed by Belgium’s Walloon Region as part of the Marshall Plan at the end of 2009.

All these projects fall under IBA’s strategy to diversify R&D efforts and resources by means of cooperation with other centers of expertise throughout the world. In order to protect its R&D investment, IBA dedicates EUR 800 000 annually to the management of its intellectual property. The portfolio of IBA patents filed since 1986 now stands at 331. They cover 97 different inventions, at various stages of the process: historical search, application, examination, publication and issuance of patent. Currently, 43 inventions are protected by 79 patents, and 41 inventions involving 53 patents are in the public domain. The balance of 199 patents for 13 inventions is pending approval.

ar m

ac eu

tic al

26 %

In 2009, one previous patent application was granted and 12 new applications were introduced, of which seven relate to new ideas.

➤

74 %

ent

ipm

Equ

Distribution of R&D spending between IBA's two main business areas in 2009.

10 | IBA annual report 2009

Pharmaceutical R&D activities Radiopharmaceuticals In the area of radiopharmaceuticals, there were several major developments: ➤ Scintimun® (99mTc – radiolabeling kit for the diagnosis of osteomyelitis) was granted European Marketing Approval. ➤ A major agreement was signed with Aposense (formerly NST Ltd.) giving IBA worldwide exclusivity for their fluorinated product [18F]ML-10, a novel agent for the molecular imaging of apoptosis. ➤ With Wilex AG, the clinical phase III trial for Redectane® (diagnostic imaging agent for the diagnosis of clear cell kidney cancers prior to surgery) was successfully completed by September. The NDA (New Drug Application to obtain marketing authorization in the USA) is expected to be filed with the FDA by mid-2010. ➤ The development of two 18F-fluorinated PET tracers, Dopacis® (18-Fluorodopa for the diagnosis of Parkinson’s disease and neuroendocrine tumors) and 18F-Na (for the diagnosis of bone metastasis) were completed and their marketing approval is expected in France in early 2010. ➤ A Phase III clinical study with 18F-Choline (for the staging of the disease in primary prostate cancer patients with a high likelihood of cancer extension) was launched. ➤ A new 99mTc-generator manufacturing line is now under construction in conjunction with the development of a new version of this 99mTcgenerator. ➤ IBA is also participating, as a manufacturer, in a new project for the development of radio-labeled molecules for prostate cancer therapy. This project was granted a budget of EUR 8 million from the French public innovation funding group OSEO/ISI. Part of this money will finance the development program of Astatine 211 manufacturing with the 70 MeV Arronax cyclotron in Nantes, France.

Bioassays The new technology Tag-Lite® facilitating the study of the behavior of receptors at the surface of living cells, and in particular G-Protein Coupled Receptors (GPCR), was introduced in April 2009. This target represents more than 30% of the targets screened by the pharmaceutical industry in the development of new drugs. The IBA R&D team successfully developed a full range of new products with this target and is developing several others for market introduction in 2010, in order to complete the offer in this GPRC domain. This innovative product line received recognition from the world economic community in the form of the Frost and Sullivan Innovation Prize. Equipments R&D activities Proton therapy 2009 was particularly fruitful for IBA R&D activities in the area of proton therapy with the certification (FDA and CE Marking) and market introduction of new PROTEUS 235 functionalities and equipment, including the following: ➤ A new treatment modality, Uniform Scanning, which facilitates the uniform distribution of proton doses for tumors with a surface area of up to 30 x 40 cm and a depth of 32 cm and with superior efficacy to current scattering techniques. This modality was deployed at the beginning of 2009 and has been used since in several proton therapy operational centers including the University of Florida Proton Therapy Institute, ProCure Proton Therapy Center in Oklahoma City and the University of Pennsylvania. ➤ A new totally-robotized patient positioning system which allows movement within six degrees of freedom and provides great alignment precision of the tumor with the proton beam. ➤ New radiographic digital image acquisition and monitoring software which verifies the position of the patient, calculates any correction vectors

IBA annual report 2009 | 11

Research at IBA in 2009

2009 R&D: key moments

and automatically transmits them to the patient positioning system. ➤ The Gantry Rolling Floor, a new system of rolling floor based on the caterpillar track principle, which forms a horizontal surface in the gantry enabling therapists to access patients safely and easily. ➤ A new system of patient and hospital staff safety management based on Siemens’ SIMATIC S7 programmable safety robots. ➤ The integration of IBA proton therapy equipment control systems (TCS or Treatment Control System) with different Oncology Information Systems (OIS) and Treatment Planning Systems (TPS) for scattering-type and uniform scanning treatment modalities. Compatibility with several types of OIS and TPS systems is assured by a standard DICOM interface. ➤ The integration of a collimator, consisting of movable blades, in the nozzle which can be positioned in function of the shape of the tumor to be treated (Multi Leaf Collimator). Other notable achievements include FDA approval for the use of a new treatment room concept based on two fixed lines – one horizontal, the other at 60° from it – between which the nozzle moves. The first room of this type became operational in Oklahoma City in March 2010. In 2009, IBA also initiated two projects aimed at even more precise verification of the point where the proton beam comes to rest (the Bragg peak). Cyclotrons and electron beam accelerators In 2009 an international committee of experts validated the conceptual work on the C400, the 400MeV/nucleon supraconductor accelerator, which will be used in the development of Hadron therapy. Still in the area of cancer therapy, IBA also started development of new products based on the principle of intense fields delivered by supraconductor magnets with the objective of reducing the size and energy consumption of gantry magnet installations.

12 | IBA annual report 2009

Moving to radio isotope-producing cyclotrons, the year 2009 concentrated on the start-up of the C70 delivered to Nantes. Late delivery compromised the 2009 R&D budget in areas of the calculation and design of the C30XP – a 30MeV multi-particle machine dependent on C70 development. 2009 has seen the successful completion of the C30HC (High Current) which accelerates more than 1.5 mA of protons up to 30 MeV. As far as Rhodotrons are concerned, the TT1000 prototype sold to Leoni Studer in Switzerland to replace existing Cobalt 60 sterilization units was installed and is currently in the start-up phase. Initial dosimetric measurements are very encouraging and confirm the high potential of the X-ray system. The end of 2009 also saw the launch of two new Cyclotron PET projects: the C11, an improved and optimized version of the C10, and the upgrade of the C3, a small cyclotron produced in the 1990’s. In terms of software which controls this equipment, Technology Group R&D successfully introduced the ‘object oriented’ development principle which, thanks to components developed inside the company, assists the development and maintenance of software and user interfaces of certain types of accelerators coming off the production line. All customer installations can already be tested, diagnosed, upgraded and deployed remotely from Louvain-la-Neuve, Belgium. Dosimetry Dosimetry has succeeded in maintaining market leadership through its continuous focus on innovation, treatment safety and efficiency. In 2009, several new products were introduced in various fields of activities. In Radiation Therapy, the highlights of 2009 were the development of a new Water Phantom generation based on a unique “magneto-strictive” technology and a series of product enhancements,

Research at IBA in 2009

notably in the Compass product line for IMRT and rotational therapy treatments. In addition, dosimetry solutions for particle therapy that significantly reduce the time needed for quality assurance were released and well accepted by the proton community. New applications were also investigated for the Visicoil, an accepted IBA standard for fiducial markers in prostate treatment, and a specific marker for proton therapy was released. In both Diagnostics and Radiation Therapy segments, IBA Dosimetry R&D continues to partner and develop solutions for the BUâ&#x20AC;&#x2122;s OEM partners with the aim of increasing efficiency and accuracy of their processes. The Diagnostics Division brought to market a new version of Magic Max dedicated to dose and exposure control in, amongst others, mammography screening. The first product in the field of Health Physics was developed and introduced to the market: a passive-based radiation protection system that monitors the dosage levels of radiation workers at periodic intervals.

IBA annual report 2009 | 13

Geographical presence FDG production sites (57) Albany USA Haverhill USA Cleveland USA Gilroy USA Morgantown USA Orlando USA Richmond USA Romeoville USA Somerset USA Sterling USA Kansas City USA Los Angeles USA Dallas USA Totowa USA Montreal Canada Bad Oeynhausen Germany Bruxelles Belgium Gand Belgium Fleurus Belgium Lyon France Paris France Sarcelles France Orsay France Rennes France NĂŽmes France Nancy France Bordeaux France Madrid Spain Barcelona Spain Seville Spain Malaga Spain Santander Spain Milan Italy Rome Italy Udine Italy Amsterdam Netherlands Coimbra Portugal Dinnington Royaume-Uni Guildford Royaume-Uni Delhi India Kuala Lumpur Malaysia Casablanca Maroco

14 | IBA annual report 2009

Monrol sites Istanbul-1 Istanbul-2 Ankara Adana Izmir HaeDong sites Seoul - 1 Seoul - 2 Pyeongchon Daejun Pusan Suncheon Daegu BioTech sites Albuquerque Las Vegas Lubbock

Turkey Turkey Turkey Turkey Turkey South Korea South Korea South Korea South Korea South Korea South Korea South Korea USA USA USA

Geographical presence eadquarters H IBA Group

Louvain-la-Neuve Belgium

Other offices (7) IBA Particle Therapy IBA Industrial IBA Molecular IBA China IBA Dosimetry IBA Molecular CISBIO Bioassays

Louvain-la-Neuve Louvain-la-Neuve Dulles Beijing Schwarzenbruck Saclay Marcoule

Belgium Belgium USA China Germany France France

ain Sales or other offices (4) M IBA Particle Therapy Jacksonville IBA Industrial Edgewood IBA Dosimetry Bartlett IBA Dosimetry Uppsala

USA USA USA Sweden

IBA annual report 2009 | 15

Management report Approved by the Board of Directors at its April 1st, 2010 meeting

16 | IBA annual report 2009

The global economic crisis widely affected IBA's growth in 2009, and although sales showed an increase of 8.0% and reached EUR 359.2 million, on a like-for-like basis and at a constant rate, revenues would have decreased by 6.8% compared to 2008, the growth recorded in the Pharmaceutical sector in Europe being more than offset by: ➤ The decline in revenues in the USA due to the overall economic climate. ➤ The decline in revenues from the Equipments segment due to the absence of proton therapy orders in 2008 as well as low orders in other accelerators in the first half of 2009. The Company published a loss of EUR 12 million for the years; besides the low revenues, this result comes from "one off" expenses on two projects with high R&D content. These expenses come from the revaluation of likely delays in finalizing these very high value technological projects. Under

these conditions, the Company will not be able to distribute dividends in 2010 for the year 2009. However, this does not affect its policy in the matter and recommence dividend distribution as soon as possible. Despite these results, the second half of 2009 and the first months of 2010 allow us to look forward to the future with confidence: ➤ During the second half of 2009, the Company saw an upswing in the amount of equipment orders which had fallen sharply in late 2008 and early 2009. Today, the backlog has risen to more than EUR 200 million. ➤ Operating cash flow greatly improved in the second half of the year, the activity being mainly associated with the proton therapy projects. ➤ The Company has lines of credit of EUR 100 million (among others through a longterm loan from the European Investment Bank), less than a third of which was used at the end of 2009.

Overview of IBA business segments For financial reporting purposes, IBA is divided into two business segments: The Pharmaceuticals segment encompasses radiopharmaceutical agents (production and distribution) and bioassay operations. Radiopharmaceuticals: ➤ PET1: primarily fluorodeoxyglucose (FDG), a chemical compound used in molecular imaging for the diagnosis of many diseases (mainly cancer). ➤ SPECT2: used in nuclear medicine for therapy and imaging. Bioassays: ➤ A line of biomarkers used for in vitro medical diagnoses (e.g. radioimmunoassays). ➤ The Group’s new HTRF®3 technology also gives it a presence in the in vitro screening of new drugs for the pharmaceutical industry and biotech companies. (1) PET = Positron Emission Tomography (2) SPECT = Single Photon Emission Computed Tomography (3) HTRF = Homogeneous Time-Resolved Fluorescence

➤ More than half of these products are used in the diagnosis and treatment of cancer. The Equipments segment, which encompasses the following: ➤ Proton Therapy which offers turnkey solutions for more precise treatment of cancer with fewer side effects through the use of proton beams. ➤ Particle Accelerators which offer a line of cyclotrons used for the production of PET radioisotopes (Positron Emission Tomography) or SPECT (Single Photon Emission Computed Tomography); and a line of industrial accelerators for sterilization and ionization (E-beam and Rhodotron® and Dynamitron® X-ray types). ➤ Dosimetry which offers measurement instruments and quality assurance for radiotherapy and medical imaging enabling health care staff to check that the equipment used administers the planned doses in the intended spot. IBA annual report 2009 | 17

Management report

Highlights of the year

BUSINESS SEGMENTS Pharmaceuticals Equipments CONSOLIDATED SALES

2008 (EUR ‘000)

2009 (EUR ‘000)

Change (%)

149 971 182 636 332 607

203 587 155 574 359 161

35.8% -14.8% 8.1%

IBA’s two business segments – Pharmaceuticals and Equipments – are made up of four business areas whose sales and highlights are detailed in this management report for the year 2009:

Total sales and services for 2008: EUR 332 607 million

% 12 Ac

18% A

Phar

45 %

11% Do sime

tr y

Phar maceuticals

18 | IBA annual report 2009

nt oto Pr

20 %

26 % Pr

oto

n th

era

tr y Dosime

s maceutical

rap y

rat

ato

ele

ler

11%

Total sales and services for 2009: EUR 359 161 million

57 %

The following table presents the summary operating results for Pharmaceuticals:

Sales and services - Radio-pharmaceuticals - Bioassays REBITDA % of sales REBIT % of sales

2008 (EUR ‘000)

2009 (EUR ‘000)

Change (EUR ‘000)

Change (%)

149 971 126 851 23 120 14 724 9.8% 2 918 1.9%

203 587 165 898 37 689 16 141 7.9% 1 135 0.6%

53 616 39 047 14 569 1 417

35.8% 30.8% 63.0% 9.6%

-1 783

-61.1%

2008 REBITDA corrected for non recurring elements compared to the 2008 publication. REBITDA: Recurring earnings before interest, taxes, depreciation and amortization. REBIT: Recurring earnings before interest and taxes.

Revenue growth was largely impacted by the acquisition of CISBIO International. For the record, the year 2008 only included seven months of this activity compared with 12 months in 2009. On a likefor-like basis and at constant rate, segment growth would have been 1%. Growth on a like-for-like basis of more than 10% in Europe compensated for the decline of 12% in the United States. The low volume in the USA as well as a greater allocation of central costs weighed on the profitability of the segment overall but the second half of the year allowed the company to see a net recovery in comparison with the first semester. Also, the operating profit reached 2.6% of sales and services for the second half of 2009 compared with a loss in the first semester. Strategically, following two agreements signed during the first six months of 2009, IBA customers can now benefit from a network of more than 50 PET radiopharmaceutical production and distribution sites on three continents. ➤ In February 2009, a collaboration agreement was executed with the company EczacıbaşiMonrol Nuclear Products A.S. to develop the PET radiopharmaceutical market (Positron Emission Tomography) and SPECT (Single Emission Photon Computed Tomography) in the Balkans, in the Middle-East, in North Africa as well as Central and Eastern Europe; ➤ In May, 2009, a partnership with BV Cyclotron V.U., based in Amsterdam was signed for the

production and distribution of F-18 marked radiopharmaceuticals (Fluor-18) used in Positron Emission Tomography. On August 3, 2009, Cardinal Health announced its acquisition of the assets of Biotech, a PET cyclotron and nuclear pharmacies operator who had joined IBA's network in 2008. Following this transaction, the IBA network went from 53 production sites to 50. In the field of the development of new marked molecules, the year 2009 turned out to be fruitful: ➤ On September 26, 2009, IBA and Aposense Ltd. announced the signing of an exclusive collaboration agreement for the marketing of Aposense® [18F]-ML-10, the new Aposense agent for molecular imaging of apoptosis (programmed cell death). The comprehensive long-term agreement is focused on a joint collaboration and financing by IBA and Aposense of the clinical development of phase III, as well as on the latest clinical developments of [18F]-ML-10. ➤ On October 6, IBA and Wilex announced that they had ended phase III tests on patients, for the proprietary product Redectane® intended for imaging cancerous kidney tumors. The results are currently being analyzed. In the event of success, the first sales would be generated in 2011. ➤ On October 29, 2009, IBA announced that it had obtained a positive opinion from CMPHU (Committee for Medicinal Product for Human

IBA annual report 2009 | 19

Management report

Pharmaceuticals

Use) recommending a marketing authorization for Scintimun® (besilesomab). This product is destined for radioisotope imaging enabling the detection of inflammation/infections.

As a reminder, the Bioassays division received the 2009 Frost & Sullivan prize for the technological innovation of the year.

Equipments The following table provides a breakdown of Equipments sales figures by business area, as well as the segment’s overall contribution to income: 2008 (EUR ‘000)

2009 (EUR ‘000)

Change (EUR ‘000)

Change (%)

182 636 86 191 37 557 58 888 11 419 6.3% 7 833 4.3%

155 574 70 689 39 815 45 070 9 292 6.0% 6 171 4.0%

-27 062 -15 502 2 258 -13 818 -2 127

-14.8% -18.0% 6.0% -23.5% -18.6%

-1 662

-21.2%

Sales and services - Proton Therapy - Dosimetry - Accelerators & others REBITDA % of sales REBIT % of sales

After the first half of 2009, during which there was significant improvement in the profitability of the Equipments sector through the renegotiation of the terms of certain sales contracts, as well as the drop in production costs from the improvement of production processes and progress on the learning curve of the projects (especially in proton therapy), the second semester was characterized by non-recurring costs resulting from the reassessment of the probable delays in finalizing two projects of very high technological value. These elements led to the Group showing operating results nearly 22% below the previous year. This decrease in 2009 net income does not challenge the overall positive perspectives of the Company in general and the Equipments segment, in particular. In fact, the second half of 2009 was particularly rich in orders. Proton Therapy In 2009, despite the crisis, IBA was able to honor its guidance in terms of taking proton therapy orders, that is to say, two to three systems per year, and continued to prove its position of market leader factually:

20 | IBA annual report 2009

➤ In May, 2009, IBA signed an installation contract, the after-sales service and long-term maintenance of a large proton therapy center in Prague in the Czech Republic. The first patients should be treated in 2012. ➤ On July 17, 2009, IBA announced that it had been selected by ATreP (Agenzia Provinciale Per la Protonterapia) in Italy for the installation of a proton therapy center for the province of Trento. It will be the first proton therapy center equipped with an isocentric rotating gantry installed in Italy and has been established in the scope of a PPP (Public-Private Partnership). The ATreP proton therapy center will be built on land chosen for accommodating the future hospital in Trento and should begin treating patients by early 2013. Financing of this contract was finalized in December, 2009. ➤ On November 2, 2009, IBA launched the commercialization of the "Proteus Nano", a smaller size and less costly alternative to traditional proton therapy centers for cancer treatment. The unique design of the Proteus Nano comes from its smaller size. Through its use of IBA's innovative Vbeam technology, Proteus Nano optimizes space, thus reducing the site area as well as cost. This new two

in Europe. Moreover, seven IBA-built proton therapy centers are already treating patients in the United States and Asia daily. Accelerators After a very difficult first half of 2009, during which IBA had only garnered a few orders for industrial cyclotrons and accelerators, due to the difficulties customers faced in obtaining bank financing, the second half of the year ended with the logging of 14 accelerators, placing it among the best semesters of IBA for this business. During the last Nuclear Medicine Conference (SNM, Society of Nuclear Medicine), which was held in Toronto, Canada in June, IBA presented its new Cyclone® 11. It combines the advantage of a smaller sized machine with the technology of high energy cyclotrons. Based on its expertise, IBA offers the most advanced functions to the R&D and production departments of hospitals. Dosimetry During the second half of 2009, Dosimetry sales strongly increased (up 15%) compared with the second half of 2008. This increase appears to reflect the end of the slowdown observed since the fourth quarter of 2008 due to the freezing of equipment expenses decided by hospitals, particularly in the United States. During the year, IBA successfully launched several new products on the market, among them a version of Compass® and MatriXXEvolution adapted to rotational radiotherapy machinery.

Simultaneously, the installation of the systems previously ordered actively continued: ➤ The proton therapy system installed at the ProCure Proton Therapy Center of Oklahoma City, USA opened its doors at the beginning of July, 27 months after laying the foundations – a world first – whereas it generally takes three years to build a full center. ➤ Currently, IBA is building and installing nine proton therapy centers simultaneously, five of which are in the United States and four

IBA annual report 2009 | 21

Management report

treatment room is now making proton therapy more accessible than ever. ➤ Simultaneously, the Company announced its MaxiPRO renting solution for proton therapy centers, which will enable an even larger number of hospitals and cancer treatment centers to make proton therapy available to their cancer patients. This “one stop shop” offer is literally equivalent to the principle of “No Pay until Opening Day”. MaxiPRO is an all-inclusive renting offer making an entirely operational Proteus proton therapy system available to qualified customers, in return for a predefined monthly fee. This fee covers the Proteus system, its installation, its secondary systems and the building as well as the use and maintenance of the equipment, or a part of these services, during an agreed upon period of time. ➤ In December 2009, IBA succeeded at trial in the scope of its cancellation request of the Skandion contract in Sweden for the installation of a turnkey proton therapy center there. In a decision dated August 11, 2009, the public authority had decided to grant the contract to Varian Medical Systems Inc. IBA judged that the procedure was flawed, that the submitted offers were evaluated in an incorrect way and that the procedure had been conducted in violation of the principles of transparency and equality of treatment. Therefore, an appeal was introduced before the administrative court of Uppsala. In a decision dated December 3, 2009, the court judged the appeal to be justified and proclaimed the cancellation of the awarding of the contract.

Consolidated annual financial statements Income statement Consolidated sales and services for the year 2009 were up EUR 26.6 million or 8.0% compared with 2008. They totaled EUR 359.2 million in 2009, compared to EUR 332.6 million in 2008. This increase is explained entirely by a progression in the “pharmaceuticals” segment following the integration of CIS Bio International S.A.S. into the consolidation scope. The consolidated gross margin for 2009 totaled EUR 131.3 million compared with EUR 112.3 million for the previous period, an increase of 16.9% percent. As a percentage of consolidated sales and services, gross margin reached 36.6% versus 33.8% a year earlier. This improvement was visible in both segments. Overall recurring expenses increased 22.1% with a strong increase in the cost of sales and marketing, and general and administrative costs which grew respectively by 16.3% and 35.0% in 2009, compared to the same period in 2008. These increases reflect the change in scope resulting from the integration of CIS Bio International S.A.S. Research and development costs remained under control with an increase of 7.3% despite the significant advances in a certain number of FDA approvals, notably in Proton Therapy and in Dosimetry, the recording of the expenses resulting from the revaluation of the likely delays in finalizing projects with very high technological value, and the pursuit of new product development in the Pharmaceutical sector. The Group showed net recurring earnings of EUR 7.3 million in 2009 versus EUR 10.8 million a year earlier, or a decrease of 32.0% compared with 2008, following the impact of the one-off expenses previously mentioned for EUR 2.8 million. Excluding these, recurring net income would have been in line with the previous year, despite very difficult economic conditions.

22 | IBA annual report 2009

The other operating expenses for the year 2009 rose to EUR 10.5 million and mainly reflected more than EUR 9 million of expenses resulting from the revaluation of likely delays in finalizing the aforementioned projects. The positive earnings for 2008, which stood at EUR 6.4 million, primarily reflected the impact of the acquisition of CIS Bio International S.A.S. and in particular, a contribution of EUR 14 million by the French CEA (Commissariat à l’Energie Atomique, Atomic Energy Commission) to help CIS Bio International S.A.S. meet its obligations in connection with the decommissioning of certain facilities in Saclay after 2017. It also includes depreciation of various tangible and intangible assets. IBA posted a financial loss of EUR 5.1 million in 2009 due to the combined effect of treasury investments discounting charges on long-term provisions, interest expenses on financial liabilities and the revaluation of financial instruments to fair value. For the year 2009, taxes represented an expense of EUR 4.8 million resulting mainly from fluctuations of deferred tax assets with out any negative impacts on the Group's cash flow. The share of profit of companies consolidated using the equity method totaled EUR 0.8 million for the year 2009, coming essentially from partnerships in the molecular imaging business. For the year 2008, the Company had recorded an expense of EUR 2.4 million primarily made up of the results of CIS Bio International S.A.S. for the first 5 months of 2008, which were particularly affected during that period by a provision for restructuring. The net loss stood at EUR 12.3 million in 2009 compared with a profit of EUR 5.3 million for 2008.

Non-current assets increased to EUR 13.8 million during 2009. They went from EUR 251.6 million as of December 31, 2008 to EUR 265.4 million at the end of 2009. The change is explained mainly by the following activity: ➤ Together, tangible (EUR 37.0 million) and intangible (EUR 79.5 million) fixed assets remained close to their 2008 level, investments made for the renovation of the Saclay (Paris) site in France, for the construction and improvement of production sites for radiopharmaceutical products for PET and for the development and industrialization of new molecules having been compensated by depreciation and write-offs. ➤ Other long-term liabilities increased from EUR 15.0 million to reach EUR 80.1 million mainly after the increase of downpayments collected on proton therapy contracts for which the corresponding receivables do not qualify for derecognition according to IAS39. In addition to the EUR 39.6 million downpayments, this caption also includes EUR 32.2 million of assets reserved for the decommissioning and future renovation of the Group’s installations. Non-current liabilities were practically stable from one year to the next, going from EUR 157.4 million as of December 31, 2008 to EUR 158.0 million at the end of 2009. The movement of EUR 0.6 million is explained by the following fluctuations: ➤ Long-term debts decreased by EUR 5.5 million, mainly following transfers to short-term. ➤ Provisions decreased by EUR 2.4 million, mainly due to their utilization in the scope of the restructuring of CIS BIO International S.A.S. for more than EUR 4 million. ➤ Other long-term liabilities increased by EUR 7.9 million, primarily due to the recording of

down payments on proton therapy contracts for which the related receivables do not qualify for derecognition under IAS 39. The Group’s net cash position went from EUR 17.8 million at the end of 2008 to EUR -17.1 million as of December 31, 2009. Current cash flow is positive and amounts to EUR 17.6 million, gross. The decrease in net cash of EUR 34.9 million compared with the positive net financial position of EUR 17.8 million at the end of 2008 is explained by investments associated mainly with the Pharmaceutical business for a total of EUR 31.7 million. These essentially relate to the renovation of the production site in Saclay (France) whose works are nearing their end as well as the preparation for the launching of new proprietary molecules. Research and development In 2009, research and development expenses for the Group rose to EUR 29.0 million, compared to EUR 27.0 million in 2008. These considerable investments have enabled the Company to remain one of the global leaders in all the markets in which it is active. Acquisitions and divestments in 2009 In 2009, IBA did not conduct any significant mergers and acquisitions, unlike the year before during which IBA exercised its call pertaining to 80.1% of RadioPharma Partners S.A. (holding an 80.1% investment in CIS Bio International S.A.S.) as well as 19.9% of Sceti Medical Labo KK. Capital increase and granting of subscription rights Over the course of the year, the Board of Directors exercised two capital increases with a waiver of the preemptive rights of the existing shareholders in the context of the authorized capital. In April 2009, IBA offered a subscription of 200 000 shares to personnel of the Group. On May 29, 2009, it was noted that out of the 200 000 new shares offered in subscription, 121 838 shares were subscribed to at the price

IBA annual report 2009 | 23

Management report

Consolidated balance sheet and financial structure The most significant balance sheet fluctuations for the year 2009 were brought about essentially by the nine proton therapy orders which are currently in progress as well as the investment and development programs of pharmaceutical activities.

of EUR 4.09 per share. The shares offered in subscription were ordinary registered shares representative of the capital of IBA, delivered with VVPR strips and created with participation taking effect in 2009. They were offered at a subscription price equal to the average market price of the 30 days preceding the offer, with a discount of 16.67% The shares are unavailable for a period of three years taking effect at the end of the subscription period. In September 2009, the Board of Directors issued 1 000 000 stock options to the employees and collaborators of the Group, as part of the

2009 stock option plan, with 620 000 free and 380 000 saleable options. On December 16, 2009 it was noted that 346 658 free options and 89,193 saleable options were subscribed to. Consequently, the cancellation of 273 422 free options was recorded. The exercise price of a option is EUR 8.26. In September, 2009, the Board of Directors approved the launch of a treasury share repurchase program by IBA, in order to neutralize the dilutive effect of the stock option plans. During 2009, IBA S.A. acquired 75 637 shares for a total price of EUR 689 346.

IBA S.A.’s statutory accounts and appropriation of net profit/(loss) Ion Beam Applications S.A. posted sales and services, down 25% at EUR 136.6 million in 2009, compared with EUR 183.4 million in 2008. The decline in revenue is particularly due to the absence of proton therapy orders in 2008 as well as low orders for other accelerators in the first half of 2009. The operating income which posted a loss of EUR 1.7 million at the end of 2008, posted a loss of EUR 6.8 million at the end of 2009. The Company showed a net loss of EUR 10.9 million versus a net gain of EUR 6.8 million in 2008.

24 | IBA annual report 2009

The loss will be carried forward but is not of a recurring nature. At the end of 2009, IBA S.A. owned a branch in France, created in Paris (Orsay) in the scope of one of its equipment projects. During the Annual Shareholder's Meeting on May 12, 2010, the Board of Directors will not offer a dividend for 2009.

For more details on this topic, we refer to the "Corporate Governance, Management, and Control" section of this annual report. The Board meeting on March 3, 2009 deciding on the Compensation Committee report led to the application of the conflict of interest of directors, procedure, as stipulated by Article 523 of Belgian Code of Company Law. This conflict of interest involved the managing directors in their role as the heads of management services companies providing services to IBA. After deliberation, the Board unanimously approved the recommendations made by the Compensation Committee in its report to the Board and regarding both the strategic goals assigned to these management companies for 2009, and the determination of variable revenue already earned for 2009. The Board's decision was then communicated to the managing directors. The Board meeting on Thursday, April 02, 2009 deciding on the approval of the stock purchase plan for the employees and colleagues of IBA S.A. and its Belgian subsidiaries led to the application of the procedure stipulated in the Belgian Code of Company Law for cases of conflict of interest involving directors. This conflict of interest involved the managing directors in their capacity as beneficiaries of said plan. After deliberation, the Board unanimously approved the terms of the IBA S.A. and Belgian subsidiaries employee and associate stock purchase plan and the terms of the special report drafted in application of Article 596 of the Belgian Code of Company Law. The Board's decision was then communicated to the managing directors.

directors with the exception of the President and the President of the Audit Committee in their capacity as beneficiaries of said extension. After deliberation, the Board unanimously approved the extension of the stock option plans for 2004, 2005, 2006 and as proposed by Management and the terms of the special Board reports drafted in application of Articles 583, 596 and 598 of the Belgian Code of Company Law. Finally, the Board meeting on August 28, 2009 deciding on the launch of a stock option plan also led to the application of the procedure stipulated in Article 523 of the Belgian Code of Company Law for cases of conflict of interest involving directors. This conflict of interest related to the group of Board members in their capacity as beneficiaries of said plan, with the exception of M. Nicole Destexhe (Institute of Radio Elements), Mr. Peter Vermeeren (PSL Management Consulting SCS) and Mr. Jean-Jacques Verdickt (J.J. Verdickt S.P.R.L.) who declared that they did not wish to be in the list of beneficiaries. After deliberation, the Board unanimously approved the launching of a stock option plan which was limited to 1 000 000 options, as well as the terms of the draft special Board report drafted in application of Articles 583, 596, and 598 of the Belgian Code of Company Law.

The Board meeting on Wednesday, May 13, 2009 deciding on extending the stock option plans on shares from 2004, 2005, 2006 and 2007 led to the application of the procedure stipulated in Article 523 of the Belgian Code of Company Law for cases of conflict of interest involving directors. This conflict of interest related to the Group of

IBA annual report 2009 | 25

Management report

Corporate structure and governance

Competence and independence of the members of the Audit Committee In accordance with Article 96 (paragraph 9) of the Belgian Code of Company Law, the Board of Directors of IBA announced that Mr. Jean-Jacques Verdickt, President of the Audit Committee and member of the Board of Directors since 2006, currently occupies the position of President of the company Techspace Aero. He has vast professional experience in accounting

and audit matters and holds several seats in other companies, notably as Vice-President of Euroclear Group, President of the audit committee of Euroclear and Director of CBC, Magotteaux Group, Euroclear Ban, Logiver, Bone Therapeutics and of the Walloon Union of Companies. He has no investment or other significant interest in the Company.

Shareholders Belgian Anchorage IRE (Institut des Radioéléments) Sopartec UCL IBA Investments SCRL(*) Ion Beam Applications S.A.(*) Public Total

Number of shares 7 773 132 1 423 271 529 925 426 885 635 530 75 637 15 854 775 26 719 155

% 29.09% 5.33% 1.98% 1.60% 2.38% 0.28% 59.34% 100%

(*) As of December 31, 2009, IBA S.A. held a total of 75 647 of its own shares and a total of 635 530 shares through the company IBA Investments S.C.R.L., a wholly owned indirect subsidiary.

Principal risks and uncertainties faced by the Company Besides the risks to which all industrial companies are exposed, IBA is subject to significant risks specific to its operations. These risk factors are described in the following list, which does not claim to be exhaustive. Authorizations A number of IBA products and equipment are subject to regulatory approval, such as medical equipment or pharmaceutical products. This approval must be obtained in each country where IBA wishes to sell these products or equipment. For example at the end of 2009, for its proton therapy equipment, IBA had regulatory approval for the United States FDA (Food and Drug Administration), for the European Union EC (European Commission), for China SDA (State Drug Administration), and South Korea. These authorizations can always be challenged by the relevant authorities. Because of the technological

26 | IBA annual report 2009

developments of IBA's equipment, additional authorizations must be solicited. Also in 2009, IBA obtained authorization from the FDA for an improvement of access in the Gantry (Gantry rolling floor), an improvement to the Gantry for treatment in “Inclined beam line”. Similarly, in Europe IBA obtained the EC marking of the robotic positioning system, uniform scanning, the gantry rolling floor and the interface to the Oncology Information System (proton therapy). Similarly, the production and distribution of radiopharmaceuticals is the subject of an important regulation which the Company must comply with at all times in order to continue to market its products. Technological risks The Company continues to invest heavily in research and development and cannot overlook the probability that one of its prototypes or new

Reimbursement of health care The subsidizing of costs by health care reimbursing institutions for PET scans or SPECT scans or for the treatment of certain diseases involving direct or indirect use of IBA equipment is subject to review. The reimbursement policies of these organizations in health care matters will have an influence on the volume of orders that IBA will be able to obtain. These subsidies from reimbursement institutions differ from country to country, and can vary widely. Product liability insurance Use of the Company’s products may expose it to certain liability lawsuits. The Company maintains what it believes to be sufficient insurance to protect it in the event of damages arising in a product liability lawsuit or from the use of its products. In a country such as the United States, where the slightest incident may result in major lawsuits, there is always a risk that a patient who is dissatisfied with services delivered using the Company’s products may initiate legal action against it. The Company cannot guarantee that its insurance coverage will always be sufficient to protect it from such risks or that it will always be possible to obtain coverage for such risks.

are recently established companies in innovative sectors. IBA cannot guarantee that all of these investments will be profitable in the future or that some projects will not be terminated prematurely. In some cases, IBA also invests its surplus cash in very liquid and highly rated (AAA) financial instruments but cannot, however, predict sudden changes in these ratings, or market modifications leading to the disappearance of this liquidity. Risk of dismantling CISBIO recently obtained INB (Installation Nucléaire de Base or Basic Nuclear Facility) designation in France. As an INB-designated facility, it is required to set aside resources for the restoration of the operating site where its activities are located at the expiration of a period ending in either 2022 or 2078, as applicable. Dependence with respect to certain members of the staff Since the Company was established, the number of highly qualified persons that it employs has significantly increased. However, it is possible that the defection of certain key employees possessing specific expertise could, at some point, affect one of the Company’s business areas.

Foreign exchange risks The Company is exposed to foreign exchange risks when it signs certain contracts in foreign currencies or when it invests abroad. To the fullest extent possible, the Company employs the financial instruments necessary to limit its exposure to these risks. The Company’s financial risk management objectives and policy, as well as its policies on price risk, liquidity risk, and cash flow risk, are described in greater detail in the notes to its consolidated financial statements.

Dependency on a specific customer or a limited number of orders In general, IBA’s customers are diversified and are located on several continents. For its equipment, particularly its proton therapy systems, the Company depends each year on a number of orders that are executed over several financial years. In this field of business, progress, or lack of progress on an order, or changes in an order that were not anticipated at the beginning of the year, can have a significant impact over several accounting periods. On the other hand, the lead time for fulfilling orders gives the Company good visibility on its level of activity several months ahead of the orders.

Asset depreciation risks IBA invests in companies whose business sector is complementary to its own. In most cases, these

Intellectual property (patents) The Company holds intellectual property rights. Some of these rights are generated by employee

IBA annual report 2009 | 27

Management report

molecules may not be commercially viable or may become obsolete during its development because of competing technological developments.

or production process know-how and are not patent-protected. The Company holds patents, but it cannot guarantee that these patents are broad enough to protect the Company’s intellectual property rights and to keep its competitors from gaining access to similar technologies. The Company cannot guarantee that the defection of certain employees would not have a negative impact on its intellectual property rights. Competition and risks of rapid product obsolescence Currently, IBA has no direct competitor covering all the markets in which it is present. However, in some of its markets, it is competing against some of the world’s largest corporations. These corporations have highly developed sales and marketing networks and, more importantly, extensive financial resources beyond comparison with those of IBA. Furthermore, there is always the possibility that a

new technology (a revolutionary cancer treatment therapy, for example) may be developed that would render a portion of IBA’s current product line obsolete. However, developing and marketing a new technology takes a relatively long time. Penalties and warranties Some contracts may contain warranties or penalties. While the warranty or penalty is generally a few percent of the amount of the contract in the case of conventional sales contracts, it may be significantly higher in the context of publicprivate partnerships inasmuch as the penalties must cover the associated financing. Such clauses are applicable to a limited number of contracts and are essentially found in the scope of proton therapy contracts. The possibility that a customer may one day exercise such a warranty or penalty clause cannot be excluded.

Events subsequent to the end of the reporting period In a press release dated February 19, 2010, IBA confirmed having received a supplemental order for a second treatment room on behalf of its Italian customer ATreP (Agenzia Provinciale Per la Protonterapia).

a proton therapy system to the ProCure Proton Therapy Center of Somerset, New Jersey in the United States. The contract is financed and is immediately in force. It represents IBA equipment valued between EUR 30 and 45 million

On February 23, 2010, IBA announced that it has chosen ProCure Treatment Centers, Inc. to supply

General outlook for 2010 In view of the uncertainties associated with the economic situation, the Company no longer makes forecasts on future results. Nevertheless, as previously indicated, the second half of 2009 and the first months of 2010 allow us to look forward to the future with confidence: ➤ During the second semester of 2009, the Company saw an upswing in the amount of equipment orders which had slowed sharply in late 2008 and early 2009. Today, the backlog has risen to more than EUR 200 million.

28 | IBA annual report 2009

➤ Operating cash flow greatly improved in the second half of the year, the activity being mainly associated with proton therapy projects. ➤ The Company has lines of credit of EUR 100 million among others through a long term loan received from the European Investment Bank, less than a third of which was used at the end of 2009. IBA’s long-term strategy is based on the following:

➤ Molecular imaging will increasingly be used, allowing more precise diagnoses and therapies better adapted to the patients. ➤ IBA is continuing to consider its presence in a number of growth markets for the coming years. ➤ IBA is the world leader in these niche markets.

Statement of the directors This management report and the accompanying financial statements have been established by the CEO, (Chief Executive Officer) Pierre Mottet and the CFO, (Chief Financial Officer) Jean-Marc Bothy. To their knowledge: they have been established in accordance with applicable accounting standards, give a true and fair image of the assets, the financial position and the results of the issuer and

of the companies included in the consolidation. The management report contains a faithful account of the important events and the main transactions with related parties for the year 2009 and on their effect on the set of consolidated financial statements, as well as a description of the main risks and uncertainties which the Company faces.

IBA annual report 2009 | 29

Management report

➤ The World Health Organization believes that the number of new cancer cases will continue to climb steeply over the next 20 years. ➤ The use of radio therapy will continue to be one of the main treatment modes.

IFRS consolidated financial statements for the year ended December 31, 2009

30 | IBA annual report 2009

Ion Beam Applications SA (the "Company" or the “parent”), founded in 1986, and its subsidiaries (together, the "Group" or “IBA”) are committed to technological progress in the field of cancer diagnosis and therapy and deliver efficient, dependable solutions providing unequaled precision. IBA also offers innovative solutions for everyday hygiene and safety. The Company is a limited company incorporated and domiciled in Belgium. The address of its registered office is Chemin du Cyclotron, 3; B-1348 Louvain-la-Neuve, Belgium. The Company is listed on the pan-European stock exchange Euronext and is included in the Bel MID Index. Consequently, IBA has agreed to follow certain rules to enhance the quality of financial information provided to the market. These include: ➤ Publication of its annual report, including its audited annual consolidated financial statements, within four months from the end of the financial year;

➤ Publication of a half-yearly report covering the first six months of the financial year within two months from the end of the second quarter; ➤ Publication of half-yearly and annual consolidated financial statements prepared in accordance with IFRS; ➤ Audit of its annual consolidated financial statements by its auditors in accordance with the auditing standards set forth by the International Federation of Accountants (“IFAC”). These consolidated financial statements were approved for release by the Board of Directors on April 1, 2010.

IBA annual report 2009 | 31

IFRS consolidated financial

Introduction

Statement of consolidated financial position at December 31, 2009 The Group has chosen to present its balance sheet on a current/non-current basis. The notes on pages 37 to 97 are an integral part of these consolidated financial statements.

Notes ASSETS Goodwill Other intangible assets Property, plant, and equipment Investments accounted for using the equity method Other investments Deferred tax assets Other long-term assets Non-current assets Inventories and contracts in progress Trade receivables Other receivables Short-term financial assets Cash and cash equivalents Current assets

December 31, 2009 (EUR ‘000)

7 7 8 10 10 11 12

29 936(1) 37 768 78 693 3 643 2 420 33 986 65 111 251 557

29 563 37 020 79 526 5 097 2 377 31 732 80 093 265 408

13 14 14 21 15

85 759 74 820 42 341 2 275 53 943 259 138

97 011 70 178 26 869 2 591 17 586 214 235

510 695

479 643

37 285 124 358 -7 563 9 220 -17 064 5 446 151 682

37 505 124 788 -9 515 16 077 -16 377 -9 117 143 361

684

781

152 366

144 142

TOTAL ASSETS EQUITY AND LIABILITIES Capital stock Capital surplus Treasury shares Reserves Currency translation difference Retained earnings Capital and reserves

December 31, 2008 (EUR ‘000)

16 16 16 17 17 17

Non-controlling interests EQUITY Long-term borrowings Deferred tax liabilities Provisions Other long-term liabilities Non-current liabilities

18 11 19 20

11 885 470 99 545 45 515 157 415

6 372 1 004 97 169 53 413 157 958

Short-term liabilities Other short-term financial liabilities Trade payables Current income tax liabilities Other payables Current liabilities

18 21 22

24 252 2 498 71 518 1 942 100 704 200 914

28 275 103 48 264 2 198 98 703 177 543

358 329 510 695

335 501 479 643

TOTAL LIABILITIES TOTAL equity and LIABILITIES

(1) The consolidated financial position at December 31, 2008 has been adjusted to reflect the final purchase price allocation for CIS Bio International SAS and its subsidiaries.

32 | IBA annual report 2009

The Group has chosen to present its income statement using the “function of expenses” method. December 31, 2008 (EUR ‘000)

December 31, 2009 (EUR ‘000)

Sales and services Cost of sales and services Gross profit

332 607 220 272 112 335

359 161 227 850 131 311

Selling and marketing expenses General and administrative expenses Research and development expenses Other operating expenses Other operating (income) Financial expenses Financial (income) Share of (profit)/loss of companies consolidated using the equity method Profit/(loss) before taxes

30 368 44 215 27 001 18 871 -25 230 13 584 -10 947 2 363 12 110

35 316 59 707 28 982 18 887 -8 353 11 990 -6 865 -812 -7 541

6 781 5 329

4 752 -12 293

0 5 329

0 -12 293

5 300 29 5 329

-12 492 199 -12 293

Earnings per share from continuing and discontinued operations (EUR per share) - Basic 34 - Diluted 34

0.20 0.20

-0.48 -0.47

Earnings per share from continuing operations (EUR per share) - Basic - Diluted

34 34

0.20 0.20

-0.48 -0.47

Earnings per share from discontinued operations (EUR per share) - Basic - Diluted

34 34

0.00 0.00

Notes

Tax (income)/expenses Profit for the period from continuing operations Profit/(loss) for the period from discontinued operations Profit/(loss) for the period

24 24 25 25 10

Attributable to: Equity holders of the parent Non-controlling interests

IBA annual report 2009 | 33

IFRS consolidated financial

Consolidated income statement for the year ended December 31, 2009

Consolidated statement of comprehensive income for the year ended December 31, 2009 December 31, 2008 (EUR ‘000)

December 31, 2009 (EUR ‘000)

5 329

-12 293

Changes in available-for-sale financial asset reserves Changes in strategic hedge reserves Changes in post-employment benefit reserves Other changes in reserves Changes in currency translation differences Permanent financing-related changes Income tax-related changes

65 -1 113 -323 142 -3 942 -1 914 1 101

2 075 1 066 1 123 -1 264 2 643 -692

Net income/(expenses) recognized directly in equity

-5 984

4 951

-655 -684 29

-7 342 -7 541 199

Income/(expense) for the period

Comprehensive income Attributable to: Group Non-controlling interests

34 | IBA annual report 2009

EUR ’000

Attributable to equity holders of the parent

Noncontrolling interests

Total

Capital stock

Capital surplus

Treasury shares

Hedging reserves

Other reserves

Currency translation difference

Balance at January 01, 2008 Net income/ (expenses) recognized directly in equity Profit/(loss) for the period Comprehensive income for the period Purchase of treasury shares Dividends Employee stock options and sharebased payments Increase/(reduction) of capital stock/ capital surplus Acquisition of noncontrolling interests Balance at December 31, 2008

36 215

115 199

-6 746

1 802

6 595

-12 309

-1 113

-116

-4 755

37 285

124 358

-7 563

689

8 531

-17 064

5 446

684

152 366

Balance at January 01, 2009 Net income/ (expenses) recognized directly in equity Profit/(loss) for the period Comprehensive income for the period Purchase of treasury shares Dividends Employee stock options and sharebased payments Increase/(reduction) of capital stock/ capital surplus Other changes in non-controlling interests Balance at December 31, 2009

37 285

124 358

-7 563

689

8 531

-17 064

5 446

684

152 366

1 066

3 198

687

-1 113

-116

-4 755

Retained earnings 70

655

5 300

5 329

5 300

-655

-817 -4 412

-4 412 2 052

2 052

9 159

10 229

4 488

1 066

3 198

687

4 488

4 951

-12 492

199

-12 293

-12 492

199

-7 342

-1 952

-1 952 -2 127

-2 127 2 593

2 593

220

37 505

430

124 788

141 481 -5 984

-817

1 070

Shareholders’ equity

650

-9 515

1 755

14 322

-16 377

-102

-46

-9 117

781

144 142

IBA annual report 2009 | 35

IFRS consolidated financial

Consolidated statement of changes in shareholders’ equity

Consolidated cash flow statement The Group has chosen to present the cash flow statement using the indirect method. December 31, 2008 (EUR ‘000)

December 31, 2009 (EUR ‘000)

5 300

-12 492

12 586 3 404 1 122 3 897 2 148 6 781 2 363

15 460 5 810 325 -1 808 7 965 2 661 -812

2 927 40 528

1 254 18 363

Trade receivables, other receivables, and deferrals Inventories and contracts in progress Trade payables, other payables, and accruals Changes in working capital

-6 394 -28 414 8 515 -26 293

18 142 -11 176 -22 523 -15 557

Income tax paid/received, net Interest expense Interest income Net cash used in/generated from operations

-1 647 1 944 -2 616 11 916

-1 137 2 387 -2 680 1 376

-18 672 -6 043 2 866 47 195 -4 375 0

-17 175 -3 273 322 0 -672 -51

-34 076 -8 986 -22 091

0 -10 880 -31 729

11 162 -10 810 -1 944 2 616

23 289 -24 222 -2 387 1 129

10 050 -818 -4 018 -934 5 304

608 -1 952 -2 039 -1 038 -6 612

58 210 -4 871 604 53 943

53 943 -36 965 608 17 586

Notes CASH FLOW FROM OPERATING ACTIVITIES Net profit/(loss) for the period attributable to equity holders of the parent Adjustments for: Depreciation and impairment of tangible fixed assets Amortization and impairment of intangible assets Write-off on receivables Changes in fair value of financial assets (gains)/losses Change in provisions Taxes Share of result of associates and joint ventures accounted for using the equity method Other non-cash items Net profit/(loss) before changes in working capital

CASH FLOW FROM INVESTING ACTIVITIES Acquisition of property, plant, and equipment Acquisition of intangible assets Disposals of fixed assets Acquisition of subsidiaries, net of acquired cash Acquisition of third party and equity-accounted companies Disposals of subsidiaries and equity-accounted companies, net of assigned cash Acquisition of non-current financial assets and loans granted Other investing cash flows Net cash used in/generated from investing activities

8 7 14 19 26 10 28

CASH FLOW FROM FINANCING ACTIVITIES Proceeds from borrowings Repayments of borrowings Interest paid Interest received Capital increase (or proceeds from issuance of ordinary shares) Purchase of treasury shares Dividends paid Other financing cash flows Net cash used in/generated from financing activities Net cash and cash equivalents at beginning of the year Change in net cash and cash equivalents Exchange gains/losses on cash and cash equivalents Net cash and cash equivalents at end of the year 36 | IBA annual report 2009

IFRS consolidated financial

Notes to the consolidated financial statements

Page

note

38 52 58 61 64 65 67 70 71 71 73 74 74 75 76 76 79 79 82 83 84 85 85 85 86 87 88 89 90 92 93 96 96 96

1. Summary of significant Group accounting policies under IFRS 2. Description of financial risk management policies 3. Critical accounting estimates and judgments 4. Operating segments 5. List of equity-accounted investments 6. Business combinations and other changes in the composition of the Group 7. Goodwill and other intangible assets 8. Property, plant, and equipment 9. Lease transactions involving IBA as a lessee 10. Investments accounted for using the equity method 11. Deferred tax assets 12. Other long-term assets 13. Inventories and contracts in progress 14. Trade and other short-term receivables 15. Cash and cash equivalents 16. Capital stock and share-based plans 17. Reserves 18. Liabilities 19. Provisions 20. Other long-term liabilities 21. Other short-term financial assets and liabilities 22. Trade payables 23. Other payables 24. Other operating expenses and income 25. Financial expenses and income 26. Income tax 27. Employee benefits 28. Cash flow statement 29. Contingent liabilities 30. Commitments 31. Related party transactions 32. Fees for services rendered by the statutory auditors 33. Events after the balance sheet date 34. Earnings per share

IBA annual report 2009 | 37

1. Summary of significant group accounting policies under ifrs 1.1 Introduction The significant IFRS accounting policies applied by the Group in preparing the IFRS consolidated financial statements are described below. 1.2 Basis of preparation IBA’s consolidated financial statements for the year ended December 31, 2009 have been drawn up in compliance with IFRS (“International Financial Reporting Standards”) and IFRIC interpretations (“International Financial Reporting Interpretations Committee”) adopted by the European Union, issued and effective or issued and early adopted at December 31, 2009. These consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial instruments at fair value. These financial statements have been prepared on an accruals basis and on the assumption that the entity is a going concern and will continue in operation in the foreseeable future. The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 3.

ended December 31, 2008, with the exception of the following new standards and interpretations: ➤ IFRS 3R and IAS 27R regarding business combinations and acquisitions of non-controlling interests ➤ IAS 1R Presentation of Financial Statements ➤ IAS 23R Borrowing Costs ➤ IFRS 8 Operating Segments ➤ IFRS 7 – Improving disclosures about financial instruments ➤ Improvements to IFRS (May 2008, 34 amendments to 19 standards) The revised IFRS 3 and IAS 27 standards have been early adopted. The impact of these accounting changes is described below. IFRS 3R and IAS 27R – Business combinations and acquisitions of non-controlling interests The Group has early-adopted IFRS 3 Business Combinations (2008) for all business combinations occurring in the year starting January 1, 2009 and IAS 27 Consolidated and Separate Financial Statements (2008) for acquisitions of noncontrolling interests occurring in the year starting January 1, 2009.

The accounting policies adopted in the preparation of these consolidated financial statements comply with IFRS standards and interpretations as adopted by the European Union at December 31, 2009.

All business combinations occurring on or after January 1, 2009 are recognized in accordance with the acquisition method described in the revised standard, which requires directly attributable transaction costs (e.g. finder’s fees, legal fees, due diligence fees, and other professional or consulting fees) to be expensed as incurred, rather than being included in the cost of acquisition as was previously the case. The revised standard also requires contingent considerations to be measured at fair value in acquisition accounting and extends the disclosure requirements for business combinations.

These accounting policies are consistent with those used in the preparation of the annual consolidated financial statements for the year

This change in accounting policy has been applied prospectively. Business combinations completed in 2008 or prior periods have not been restated.

38 | IBA annual report 2009

The Group has applied the revised IAS 27 for the acquisitions of non-controlling interests described in Note 6.1. With the new accounting method, acquisitions of non-controlling interests are recorded as transactions with equity owners in their capacity as such and do not give rise to goodwill. Previously, goodwill was recognized when a non-controlling interest in a subsidiary was acquired and was measured as the positive difference between the additional investment and the acquisition-date carrying amount of the acquired net equity. The change in accounting method was applied prospectively and had no significant impact on earnings per share. IAS 1R – Presentation of Financial Statements The Group applies the revised IAS 1. The revised standard distinguishes between changes in equity arising from owner transactions and changes in equity arising from non-owner transactions. The standard also introduces a statement of comprehensive income, with the option of showing all income and expense either in a single statement or in two related statements. The Group has chosen to publish two statements. The Group presents all owner changes in equity in the statement of changes in shareholders’ equity. Non-owner changes in equity are shown in the statement of comprehensive income. Comparative information has been restated to comply with the revised standard. This change in accounting method affects only presentation and has no impact on earnings per share. IAS 23R – Borrowing Costs The standard has been revised to require capitalization of borrowing costs when such costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial amount of time to get ready for use or sale. This could be property, plant, and equipment or made-to-order

inventories. In accordance with the transitional provisions indicated in the standard, the Group has adopted these provisions prospectively. Previously, the Group expensed all borrowing costs immediately. Beginning January 1, 2009, borrowing costs are capitalized on qualifying assets. No adjustments have been made for borrowing costs incurred and expensed prior to this date, and the comparative figures have not been restated. This change has no significant impact on earnings per share. IFRS 8 – Operating Segments This standard adopts the same approach to the presentation of operating segments in the notes to financial statements as used by an entity’s operating decision maker for internal reporting requirements. Previously, operating segments were determined and presented in accordance with IAS 14 Segment Reporting. An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to transactions with other components of the same entity. The segment’s operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Discrete financial information is available for this component. Comparative segment information has been restated to comply with the transitional provisions in this standard. This change in accounting method affects only the presentation and content of the information reported and has no impact on earnings per share. See Note 4 for further details on operating segments. Amendment to IFRS 7 – Improving disclosures about financial instruments This amendment is intended to improve disclosures about the measurement of financial instrument fair value and to modify or clarify disclosures about liquidity risk management. In the first year of application, the amendment does not require

IBA annual report 2009 | 39

IFRS consolidated financial

Application of the revised IFRS 3 to all of fiscal 2008 would have resulted in the recognition of EUR 7 million of additional income . The Group has applied the revised standard for the business combinations discussed in Note 6.

entities to provide comparative data for the new information required. The amendment introduces a fair value hierarchy. This hierarchy is intended to reflect the degree of reliability of valuation methods. It has three levels: fair value based on prices quoted in active markets (Level 1); fair value determined using valuation techniques based almost exclusively on directly or indirectly observable inputs (Level 2); and fair value determined using valuation techniques based to a significant extent on non-observable inputs (Level 3). Additionally, the amendment clarifies that quantitative maturity analysis for derivative financial liabilities must be based on the liquidity risk management techniques for these instruments. Accordingly, contractual cash flows from derivatives held for trading may no longer be included in the schedule of financial liabilities, and inclusion of financial guarantees in the contractual cash flow schedule must be based on the earliest time at which these guarantees may be called upon. The following standards and interpretations, while adopted by the European Union and mandatory beginning January 1, 2009, had no impact on the 2009 consolidated financial statements: ➤ Amendment to IFRS 2 – Share-based payment: Vesting conditions and cancellations ➤ Amendment to IAS 32 and IAS 1 – Puttable financial instruments and obligations arising on liquidation ➤ Amendment to IFRIC 9 and IAS 39 – Reassessment of embedded derivatives ➤ Amendment to IFRC 1 and IAS 27 – Cost of an investment in a subsidiary, jointly controlled entity, or associate ➤ IFRIC 11 IFRS 2 – Group and treasury share transactions ➤ IFRIC 13 – Customer loyalty programs ➤ IFRC 14 – The limit on a defined benefit asset, minimum funding requirements, and their interaction

40 | IBA annual report 2009

These standards and interpretations were adopted by the European Union prior to December 31, 2009 but were not mandatory on January 1, 2009. The Group has decided not to early adopt. At this stage, it does not appear that they will have any impact on the Group’s consolidated financial statements. ➤ Amendment to IAS 32 – Classification of rights issues ➤ IFRIC 12 – Service concession arrangements ➤ IFRIC 15 – Agreements for the construction of real estate ➤ IFRIC 16 – Hedges of a net investment in a foreign operation ➤ IFRIC 17 – Distributions of non-cash assets to owners ➤ IFRIC 18 – Transfers of assets from customers The Group considers that the amendments, revisions, interpretations, and new standards listed below, which were not mandatory at January 1, 2009, will have an impact on its consolidated financial statements when they are applied in 2010 or subsequent periods, depending the standard. Their potential impact is currently being evaluated. ➤ Amendment to IAS 39 – Financial Instruments: Recognition and Measurement, regarding eligible hedged items, adopted by the European Union on September 15, 2009 and applicable for the Group beginning January 1, 2010 ➤ Amendment to IFRS 2 – Share-based Payment, regarding group cash-settled share-based payment transactions, adopted by the European Union on March 23, 2010 and applicable for the Group beginning January 1, 2010 ➤ Second omnibus of improvements to IFRS issued in April 2009 (12 amendments), adopted by the European Union on March 23, 2010 and applicable for the Group beginning January 1, 2010 ➤ IFRS 9 – Financial Instruments, as yet not adopted by the European Union but theoretically applicable for the Group beginning January 1, 2013 ➤ IAS 24 (revised) – Related Party Disclosures, as yet not adopted by the European Union but

These accounting changes are described below. Amendment to IAS 39 – Financial Instruments: Recognition and Measurement, regarding eligible hedged items The amendment clarifies that an entity may designate a portion of the changes in fair value or cash flow relating to a financial instrument as an eligible hedged item. The amendment also indicates that inflation may designated as an eligible hedged item in some cases. Amendment to IFRS 2 – Share-based Payment, regarding group cash-settled share-based payment transactions The amendment clarifies the scope of the standard and the accounting for cash-settled share-based payments within a group. IFRS 9 – Financial Instruments Phase 1 of this new standard, Classification and Measurement, was published in late 2009 and is mandatory beginning January 1, 2013. It defines a new approach to the classification and measurement of financial assets. At initial recognition, all financial assets are measured at fair value. In subsequent periods, financial debt instruments are classified either as assets measured at amortized cost or as assets measured at fair value through profit or loss. This classification depends of the entity’s model for managing financial assets and on the contractual cash flow characteristics of the financial asset. In subsequent periods, equity investments are measured at fair value through profit or loss or in equity (other comprehensive income). IAS 24 (revised) – Related Party Disclosures The revised version of this standard is intended to simplify the old standard, which was considered

too complex. The amendment provides a partial exemption for government-controlled entities. It also revises the definition of a related party. IFRIC 19 – Extinguishing Financial Liabilities with Equity This interpretation was published in November 2009 and is effective for periods commencing on or after July 1, 2010 (for the Group, the 2011 period). It clarifies the accounting when an entity renegotiates the terms of its debt with the result that the liability is extinguished by the debtor issuing its own equity instruments to the creditor (referred to as a debt-for-equity swap). This interpretation indicates that the equity instruments issued are “consideration paid” to extinguish the liability (in the same category as cash). The liability must be derecognized, and the equity instruments issued are recorded at fair value. If the fair value of the equity instruments is not reliably measurable, the fair value of the liability extinguished is used instead. Profit or loss is recognized on the difference between the carrying amount of the liability extinguished and the fair value of the equity instruments issued. This interpretation does not apply when the lender is a shareholder acting in its capacity as shareholder or when the lender and the entity are under common control before and after the transaction and the transaction includes an equity distribution from/contribution to the entity. The Group has not applied the below-listed interpretations, which had not been adopted by the European Union either at December 31, 2009 or at the publication date of its 2009 financial statements and were not mandatory at January 1, 2009. In the opinion of the Group, these amendments and revisions will have no impact on its consolidated financial statements in future years. ➤ Amendment to IFRIC 14 regarding prepayments of minimum funding requirements ➤ IFRS 1 (revised) ➤ Amendment to IFRS 1 regarding additional exemptions

IBA annual report 2009 | 41

IFRS consolidated financial

theoretically applicable for the Group beginning January 1, 2011 ➤ IFRIC 19 – Extinguishing Financial Liabilities with Equity, as yet not adopted by the European Union but theoretically applicable for the Group beginning January 1, 2011

1.3 Consolidation The parent and all of its controlled subsidiaries are included in the consolidation.

➤ Intra-group balances and transactions and unrealized gains and losses on transactions between Group companies are eliminated in full.

1.3.1 Subsidiaries Assets and liabilities, rights and commitments, and income and charges of the parent and its controlled subsidiaries are consolidated in full. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. It is presumed to exist when the IBA Group holds more than 50 percent of the entity’s voting rights. This presumption may be rebutted if there is clear evidence to the contrary. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls an entity. Consolidation of a subsidiary takes place from the date of acquisition, which is the date on which control of the net assets and operations of the acquiree are effectively transferred to the acquirer. From the date of acquisition, the parent (the acquirer) incorporates into the consolidated income statement the financial performance of the acquiree and recognizes in the consolidated balance sheet the acquired assets and liabilities (at fair value), including any goodwill arising on the acquisition. Subsidiaries are deconsolidated from the date on which control ceases. The following treatments are applied on consolidation: ➤ The carrying amount of the parent's investment in each subsidiary and the parent's portion of the equity of each subsidiary are eliminated. ➤ In the statement of consolidated financial position, non-controlling interests in the net assets of subsidiaries are identified and reported separately in the caption “Non-controlling interests”; ➤ The portion of the profit or loss of the fully consolidated subsidiaries attributable to shares held by entities outside the Group is presented in the consolidated income statement in the caption "Profit/loss attributable to non-controlling interests”;

Consolidated financial statements are prepared applying uniform accounting policies to like transactions and other events in similar circumstances.

42 | IBA annual report 2009

1.3.2 Associates An associate is an entity in which the investor has significant influence, but which is neither a subsidiary nor a joint venture (see next subsection) of the investor. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control those policies. It is presumed to exist when the investor holds at least 20 percent of the investee’s voting power but not to exist when less than 20 percent is held. This presumption may be rebutted if there is clear evidence to the contrary. All associates are accounted for using the equity method. Participating interests are presented separately in the closing date statement of consolidated financial position (in the caption “Investments accounted for using the equity method”) at an amount proportionate to the associate's equity (as restated under IFRS) including the result for the year. Dividends received from an investee reduce the carrying amount of the investment. The portion of the result of associates attributable to the Group is presented separately in the consolidated income statement in the caption "Share of profit/loss of companies consolidated using the equity method.” Unrealized profits and losses resulting from transactions between an investor (or its consolidated subsidiaries) and associates are eliminated in proportion to the investor's interest in the associate.

Similar rules have been applied to investments accounted for under the equity method, except that any goodwill arising on such investment is included in the carrying amount of the investment.

1.3.4 Treatment of goodwill or negative goodwill Business combinations are the bringing together of separate entities or businesses into one reporting entity. A business is a set of activities and assets applied and managed together in order to provide a return or any other economic benefit to its investors. In all business combinations, one entity (the acquirer) obtains control that is not transitory of one or more other entities or businesses (the acquiree).

Negative goodwill arising on such investments is included in the determination of the entity’s share of the investee’s profit or losses in the period in which the investment is acquired.

All business combinations (acquisitions of businesses) arising after January 1, 2004 are accounted for using the purchase method. The acquirer measures the cost of the business combination at the acquisition date (the date on which the acquirer obtains control over the net assets of the acquiree) and compares it with the fair value of the acquiree’s identifiable net assets, liabilities, and contingent liabilities. The difference between the two represents goodwill (if this difference is positive) or negative goodwill (if this difference is negative).

1.3.5 Acquisition of non-controlling interests The excess of the acquisition cost of noncontrolling interests over the balance sheet entry for these non-controlling interests is deducted from equity ("economic unit model").

For all business combinations arising before January 1, 2004, no retrospective restatement to fair value has been made.

USD SEK GBP CNY INR JPY

Goodwill is not amortized but instead is tested for impairment annually (or more frequently if circumstances so require). Negative goodwill is recognized as profit.

1.3.6 Translation of financial statements of foreign operations All monetary and non-monetary assets and liabilities (including goodwill) are translated at the closing rate. Income and expenses are translated at the rate of the date of the transaction (historical exchange rate) or at an average rate for the month. The principal exchange rates used for conversion to EUR are as follows:

Closing rate at December 31, 2008

Average annual rate 2008

Closing rate at December 31, 2009

Average annual rate 2009

1.4040 10.8988 0.9682 9.5655 68.9817 126.9440

1.4712 9.6254 0.7962 10.2481 64.1041 152.5253

1.4332 10.3111 0.8999 9.7705 67.0164 134.2040

1.3939 10.6321 0.8915 9.5354 67.2465 130.3441

IBA annual report 2009 | 43

IFRS consolidated financial

1.3.3 Jointly controlled entities As with associates, the equity method is used for entities over which the Group exercises joint control (i.e. joint ventures).

1.4 Intangible fixed assets Recognition as an intangible fixed asset is required when (1) this asset is identifiable, i.e. separable (it can be sold, transferred, or licensed) or where it arises from contractual or other legal rights; (2) it is probable that future economic benefits attributable to the asset will flow to IBA; (3) IBA can control the resource, and (4) the cost of the asset can be measured reliably. Intangible assets are carried at acquisition cost less any accumulated amortization and any accumulated impairment loss. Cost includes the fair value of the consideration given to acquire the asset and any costs directly attributable to the transaction, such as relevant professional fees or non-refundable taxes.

Costs arising from the development phase of an internal project (product development project or IT project) are recognized as an asset when IBA can demonstrate the following: technical feasibility, intention to complete development, how the intangible asset will generate probable future economic benefits (e.g. the existence of a market for the output of the intangible asset or for the intangible asset itself), availability of resources to complete development, and ability to measure the attributable expenditure reliably. Maintenance costs, as well as costs for minor upgrades intended to maintain (rather than increase) the level of performance of the asset, are expensed as incurred. The above recognition criteria are fairly stringent and are applied prudently.

Indirect costs as well as general overheads are not included. Expenditure previously recognized as expense is not included in the cost of the asset.

The cost of the intangible assets is allocated on a systematic basis over the useful life of the asset using the straight-line method.

Costs arising from the research phase of an internal project are expensed as incurred.

The applicable useful lives are as follows:

Intangible fixed assets

Useful life

Product development costs

3 years, except if a longer useful life is justified (however not exceeding 5 years) 5 years 3 years 3 years, except if a longer useful life is justified

IT development costs for the primary software programs (e.g. ERP) Other software Concessions, patents, licenses, know-how, trademarks, and other similar rights

Amortization commences only when the asset is available for use in order to achieve proper matching of cost and revenue. 1.5 Tangible fixed assets (property, plant, and equipment) Tangible fixed assets are carried at acquisition cost less any accumulated depreciation and any accumulated impairment loss. Cost includes the fair value of the consideration given to acquire the asset (net of discounts and rebates) and any directly attributable cost of bringing the asset to working condition for its intended use (inclusive of import duties and taxes). Directly attributable costs are the cost of site preparation, delivery costs, installation costs, relevant professional fees, and the estimated cost of dismantling and removing the asset and restoring the site (to the extent that such a cost is recognized as a provision). Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item is separately depreciated over its useful life using the straight-line method. The depreciable

44 | IBA annual report 2009

Maintenance or repair costs whose objective is to maintain rather than increase the level of performance of the asset are expensed as incurred. The applicable useful lives are as follows: Tangible fixed assets

Useful life

Land Office buildings Industrial buildings Cyclotrons and vaults

Not depreciated 33 years 33 years 15 years except in specific rare circumstances where a different useful life is justified 5 years 5 to 10 years 3 to 5 years (5 years for mainframes) 5 to 10 years 2 to 5 years

Laboratory equipment Other technical equipment Hardware Furniture and fittings Vehicles

1.5.1 Lease transactions involving IBA as a lessee A finance lease, which transfers substantially all the risks and rewards incident to ownership, is recognized as an asset and a liability at amounts equal to the fair value of the leased assets or, if lower, the present value of the minimum lease payments (= sum of capital and interest portions included in the lease payments). Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The depreciation policy for leased assets is consistent with that for similar assets owned. 1.5.2 Investment properties Investment properties for the Group’s own use are carried at acquisition cost less any accumulated depreciation and any impairment loss. 1.6 Impairment of intangible and tangible fixed assets An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount, which is the higher of the following two amounts: fair value less costs to sell (the money that IBA can recover through sale) or value in use (the money that IBA can recover if it continues to use the asset).

When possible, impairment tests have been performed on individual assets. When, however, it is determined that assets do not generate independent cash flows, the test is performed at the level of the cash-generating unit (CGU) to which the asset belongs (CGU = the smallest identifiable group of assets generating inflows that are largely independent from the cash flows from other CGUs). Goodwill arising on a business combination is allocated among the Group’s CGUs that are expected to benefit from synergies as a result of the business combination. This allocation is based on management’s assessment of the synergies gained and is not dependent on the location of the acquired assets. Since it is not amortized, goodwill is tested for impairment annually, along with the related CGU (or more frequently depending on circumstances), even if no indication of impairment exists. Other intangible and tangible fixed assets/CGUs are tested only if there is an indication that the asset is impaired.

IBA annual report 2009 | 45

IFRS consolidated financial

amount is the acquisition cost, except for vehicles. For vehicles, it is the acquisition cost less the residual value of the asset at the end of its useful life.

Any impairment loss is first charged against goodwill. Any impairment loss exceeding the book value of goodwill is then charged against the other CGUs’ fixed assets only if the recoverable amount is below their net book value. Reversals of impairment losses (other than on goodwill) are recorded if justified. 1.7 Inventories Inventories are measured at the lower of cost and net realizable value at the balance sheet date. The cost of inventories comprises all costs incurred in bringing inventories to their present location and condition, including indirect production costs. Administrative overheads that do not contribute to bringing inventories to their present location and condition, selling costs, storage costs, and abnormal amounts of wasted materials are not included in the cost of inventories. The standard cost method is used. The standard cost of an item of inventory at period-end is adjusted to actual cost. The allocation of fixed production overheads to the production cost of inventories is based on the normal capacity of the production facilities. The cost of inventories that are ordinarily interchangeable is allocated by using the weighted average cost formula. The same cost formula is used for all inventories that have a similar nature and use to the entity. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale (e.g. sales commissions). IBA books a write-down when the net realizable value at the balance sheet date is lower than the cost. IBA applies the following policy for write-down on slow-moving items:

46 | IBA annual report 2009

➤ If no movement after 1 year: write-off over 3 years; ➤ If movement occurs after write-off: reversal of write-off. However, inventory is valued individually at yearend. Exceptions to the above general rule are made when justified. 1.8 Revenue recognition (excluding contracts in progress, which are covered in the following section) Revenue arising from the sale of goods is recognized when an entity has transferred the significant risks and rewards of ownership and collectability and recovery of the related receivables are reasonably assured. The transaction is not a sale and revenue is not recognized where (1) IBA retains an obligation for unsatisfactory performance not covered by normal warranty provisions; (2) the receipt of revenue from a particular sale is contingent on the derivation of revenue by the buyer from its sale of the goods; (3) the buyer has the power to rescind the purchase for a reason specified in the sales contract; and (4) IBA is uncertain about the probability of return. Revenue is normally recognized when the buyer accepts delivery, and installation and inspection are complete. However, revenue is recognized immediately upon the buyer’s acceptance of delivery when installation is simple in nature. Revenue from the rendering of services is recognized by reference to the stage of completion of the transaction at the balance sheet date using rules similar to those for construction contracts (see next section); in other words, revenue is recognized as the related costs are incurred. Unless it is clear that costs are not incurred on a straight-line basis, revenues are spread evenly over the period of the services.

Interest income is recognized using the effective yield method. Royalties are recognized on an accrual basis in accordance with the substance of the relevant agreement. Dividends relating to year N are recognized when the shareholder’s right to receive payment is established (i.e. in year N+1). 1.9 Contracts in progress Contract costs comprise: ➤ Direct and indirect production costs (same as for inventories, see above); ➤ Such other costs as are specifically chargeable to the customer under the terms of the contract; ➤ Costs incurred in securing the contract if they can be separately identified and measured reliably and if it is probable that the contract will be obtained. When the outcome of a construction contract (i.e. estimation of the final margin) can be estimated reliably, contracts in progress are measured at production cost increased, according to the stage of completion of the contract, by the difference between the contract price and production cost (“percentage of completion” method). The stage of completion is determined by comparing actual costs incurred to date with estimated costs to completion. (Costs that do not reflect work performed, such as commissions and royalties are excluded for this calculation.) The percentage of completion is applied on a cumulative basis. When the outcome of the contract cannot be estimated reliably, revenue is recognized only to the extent of costs incurred that it is probable will be recovered; contract costs are recognized as an expense as incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is immediately expensed to income, and a loss-at-completion provision is recorded.

The Group presents as an asset the net amount due from customers on contract work for all contracts in progress for which costs incurred plus recognized profits (less recognized losses) exceed progress billings. Progress billings not yet paid by customers and retention are included in trade receivables. The IBA Group presents as a liability the net amount due to customers on contract work for all contracts in progress for which progress billings exceed costs incurred plus recognized profits (less recognized losses). When financial guarantees must be given to third parties in connection with a contract and these guarantees involve a financial risk for IBA, a financial liability is recognized. 1.10 Receivables Receivables are recognized initially at fair value and subsequently measured at amortized cost, i.e. at the net present value of the receivable amount. Unless the impact of discounting is material, the nominal value is taken. Receivables are written down when receipt of all or part is uncertain or doubtful. In general, IBA applies the following rule to writedowns of bad or doubtful debts: ➤ 25% after 90 days overdue ➤ 50% after 180 days overdue ➤ 75% after 270 days overdue ➤ 100% after 360 days overdue However, the recoverability of receivables is assessed on a case-by-case basis, and exceptions to the above general rule are made when justified. 1.11 Financial assets The Group classifies its financial assets in the following categories: loans and receivables, available-for-sale financial assets, and financial assets at fair value through profit or loss. Loans and receivables are non-derivative financial assets with fixed or determinable payments that

IBA annual report 2009 | 47

IFRS consolidated financial

The recognition criteria are applied to the separately identifiable components of a single transaction when it is necessary to reflect the substance of the transaction.

are not listed on an active market and are not held for trading. Gains and losses on loans and receivables are recorded when the loans and receivables are derecognized or impaired.

that are renewed at maturity until needed for the special purpose, these cash equivalents are deemed restricted and are classified as other longterm receivables.

Term deposits are classified as loans and receivables under IAS 39.

1.13 Capital stock Ordinary shares are classified in the caption “Capital stock.” Treasury shares are deducted from equity. Movements on treasury shares do not affect the income statement.

Investments in interest bearing securities, as well as investments in shares (other than shares in subsidiaries, joint ventures, and associates) are accounted for as available-for-sale financial assets. They are recorded at fair value, with gains and losses reported in equity, until they are impaired or sold, at which time the gains or losses accumulated in equity are recycled into the income statement. For financial assets that are classified as available for sale, a significant or prolonged decline in the fair value of the investment below its cost is objective evidence of impairment. Impairment losses on these instruments are charged to income. Increases in their fair value after impairment are credited directly to equity. Revaluation of certain financial assets used to manage the Group’s cash position, including derivative products, is recorded at fair value through profit or loss if the derivative instrument cannot be valued separately. When there are indicators of impairment, all financial assets are subject to an impairment test. The indicators should provide objective evidence of impairment as a result of a past event that occurred subsequent to the initial recognition of the asset. Expected losses as a result of future events are not recognized, no matter how likely. 1.12 Cash and cash equivalents Cash balances are recorded at their nominal value. Cash equivalents are short-term, highly liquid investments that can be used for any purpose and have a maturity date not exceeding three months from acquisition date. Cash and cash equivalents include bank overdrafts. If liquid funds are held in a special purpose account in the form of highly liquid investments

48 | IBA annual report 2009

1.14 Deferred charges and accrued income Deferred charges are the prorated amount of charges incurred in the current or prior financial periods but which are related to one or more subsequent periods. Accrued income is the prorated amount of income earned in the current or prior periods which will be received only in subsequent periods. 1.15 Capital grants Capital grants are recorded as deferred income. Grants are recognized as income at the same rate as the rate of depreciation of the related fixed assets. 1.16 Provisions A provision is recognized only when: ➤ IBA has a present obligation to transfer economic benefits as a result of past events; ➤ It is probable (more likely than not) that such a transfer will be required to settle the obligation; ➤ A reliable estimate of the amount of the obligation can be made. When the impact is likely to be material (for longterm provisions), the amount recognized as a provision is estimated on a net present value basis (discount factor). The increase in provision due to the passage of time is recognized as an interest expense. A present obligation arises from an obligating event and may take the form of either a legal obligation or a constructive obligation. (A constructive obligation exists when IBA has an established

Provisions for site repair, restoration, and decommissioning costs are recorded as appropriate in application of the above. If IBA has an onerous contract (that is, if the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it), the present obligation under the contract is recognized as a provision. A provision for restructuring is recorded only if IBA can demonstrate that the Company is under an obligation to restructure at the balance sheet date. Such obligation must be demonstrated by (a) preparing a detailed formal plan identifying the main features of the restructuring and (b) raising a valid expectation to those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features to those affected. 1.17 Pensions and other employee benefits 1.17.1 Pensions Premiums paid in relation to a defined contribution plan are expensed as incurred. Defined contribution plans are post-employment benefit plans under which IBA pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. As from the date of acquisition of CIS Bio International SAS and its subsidiaries, the Group has defined benefit plans.

These entitlements arising from commitments to employees of CIS Bio International SAS are recorded in provisions for employee benefits in accordance with IAS 19 and consist of the following: â&#x17E;¤ Entitlements of employees active at year-end in the form of benefits, supplements, and other retirement compensation not covered by the pension or insurance funds; and â&#x17E;¤ Entitlements conferred as a result of the lowering of the retirement age for employees working or having worked in hazard areas. Obligations arising from the application of these defined benefit plans are valued according to the projected unit credit method and are discounted because they may be discharged many years after the related services were performed. Actuarial calculations are required to obtain a reliable estimate of the value of accumulated employee benefits for services rendered. Actuarial differences may result from an increase or decrease in the present value of a defined benefit obligation. These actuarial differences include adjustments based on experience (the impact of disparities between previous actuarial assumptions and what actually happened) and the effect of different actuarial assumptions (such as an adjustment of the employee turnover rate or a change in the discount rate). For the valuation of defined benefit liabilities, the Group has chosen to recognize actuarial differences immediately and fully in equity in the consolidated statement of comprehensive income. The cost of past services is the increase in the present value of the defined benefit obligation arising from employee services in prior years. The cost of past services is recognized (in operating results) on a straight-line basis over the average remaining service period before the associated benefits vest. The other elements are included in financial results as other financial (income)/ expense.

IBA annual report 2009 | 49

IFRS consolidated financial

pattern of past practice that indicates to other parties that it will accept certain responsibilities and as a result has created a valid expectation on the part of those other parties that it will discharge those responsibilities.) An obligating event leaves IBA no realistic alternative to settling the obligation, independently of its future actions.

1.17.2 Stock option plans and share-based payments Share-based payments are transactions to be paid with shares, stock options, or other equity instruments (granted to employees or other parties) and transactions paid in cash or other assets when the amount payable is based on the price of the Group’s shares. All transactions involving share-based payments are recognized as expenses. Equity-settled share-based payment transactions are measured at the fair value of the goods or services received at the date on which the Group recognizes the goods and services. If the fair value of goods or services cannot be determined, the Group uses the fair value of the equity instruments granted. Equity-settled share-based payments are not remeasured. Cash-settled share-based payments are measured at the fair value of the liability. IBA does not have plans of this type. 1.18 Deferred taxes The comprehensive method and the liability method are used. Deferred taxes are recorded on the temporary differences arising between the carrying amount of the balance sheet items and their tax base, using the rate of tax expected to apply when the asset is recovered or the liability is settled. There are three exceptions to the general principle that deferred taxes are recognized on all temporary differences. Deferred taxes are not recognized for: ➤ Goodwill that is not amortized for tax purposes. ➤ Initial recognition of an asset or liability in a transaction that is not a business combination and that affects neither accounting profit nor taxable profit. ➤ Investments in subsidiaries, branches, associates, and joint ventures. Deferred taxes may be recognized only when IBA has control

50 | IBA annual report 2009

over the distribution and it is likely that dividends will be distributed in the foreseeable future. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. The same principle applies to recognition of deferred tax assets for unused tax losses carried forward. This assessment is subject to the principle of prudence. Deferred taxes are calculated for each fiscal entity in the Group. IBA is able to offset deferred tax assets and liabilities only if the deferred balances relate to income taxes levied by the same taxation authority. 1.19 Payables after and within one year Payables after and within one year are measured at amortized cost, i.e. at the net present value of the payable amount. Unless the impact of discounting is material, the nominal value is taken. 1.20 Accrued charges and deferred income Accrued charges are the prorated amount of expenses which will be paid in a subsequent financial period but relate to a prior period. Deferred income is the prorated amount of income received in the current or prior periods but related to a subsequent period. 1.21 Foreign currency transactions Foreign currency transactions are converted into the functional currency of the Group entity party to the transaction using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the conversion at the period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Exchange differences arising from the consolidation of currency items that constitute part of the reporting entity's net investment in a foreign entity (i.e. when settlement is neither planned

1.22 Derivatives and hedging activities Derivative instruments are accounted for at fair value as from the date the contracts are entered into. Changes in the fair value of derivative instruments are accounted for in the income statement unless they qualify as cash flow hedges under IAS 39. The Group designates certain derivative transactions as hedges of the variability of the fair value of recognized assets or liabilities (fair value hedges); as unrecognized firm commitments; or as hedges of the cash flow variability arising from a specific risk associated with a recognized asset or liability or with a highly probable forecast transaction (cash flow hedges). The Group documents at the inception of the transaction the relationship between the hedging instruments and the hedged item, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. a) Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

loss relating to the ineffective portion of the hedge is recognized immediately in the income statement. Amounts accumulated in equity are reclassified to income in the periods when the hedged item affects profit or loss (e.g. when the forecast sale that is hedged takes place). When a hedging instrument expires or is sold, or when a hedge no longer qualifies for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified to the income statement when the forecast transaction is ultimately recognized in income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. c) Derivatives that do not qualify for hedgeÂ accounting Certain derivative instruments do not qualify for hedge accounting. Such derivatives are recognized at fair value on the balance sheet, with changes in fair value recognized in the income statement. These instruments are designated as economic hedges inasmuch as they are not used to speculate on positions. 1.23 Operating segments A business segment is a distinguishable component engaged in providing products or services subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a specific economic environment subject to risks and returns that are different from those of segments operating in other economic environments.

b) Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in equity. The gain or

IBA annual report 2009 | 51

IFRS consolidated financial

nor likely to occur in the foreseeable future) are recorded in equity if the following two conditions are met: (1) the loan is made in either the functional currency of the reporting entity or the foreign operation and (2) the loan is made between the reporting entity and a foreign operation.

2. Description of financial risk management policies 2.1 Financial risk factors The Group’s activities expose it to a variety of financial risks, of which the largest is market risk (including currency risk). Other financial risks include credit risk, liquidity risk, interest rate risk, and commodity risk. The Group’s overall financial risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Financial risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Audit Committee of the Board of Directors. These policies provide written principles for overall financial risk management, as well as written policies covering specific areas, such as foreign exchange risk, use of derivative financial instruments and nonderivative financial instruments, and investing excess liquidity. Group Treasury identifies, evaluates, and hedges financial risks in close cooperation with the Group’s operating units. 2.1.1 Market risk a) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the U.S. dollar, the Chinese yuan, the British pound, and the Swedish krona. Foreign exchange risk arises from future and committed commercial transactions, recognized financial assets and liabilities, and net investments in foreign operations. To manage foreign exchange risk arising from future and committed commercial transactions and from recognized assets and liabilities denominated in a currency different from the entity’s functional currency, entities in the Group use forward exchange contracts, transacted with Group Treasury. Group Treasury is responsible for

52 | IBA annual report 2009

hedging the net position in each foreign currency by using forward exchange contracts entered into with banks when possible and appropriate. For segment reporting purposes, each subsidiary designates contracts with Group Treasury as fair value hedges or cash flow hedges, as appropriate. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific assets, liabilities, or committed or future transactions on a gross basis. The Group’s general hedging policy is to hedge any confirmed sales contracts denominated in a foreign currency as well as expected net operational cash flows when they can be reasonably predicted. Appropriate documentation is prepared in accordance with IAS 39. The CFO approves and the CEO is informed of significant hedging transactions, with reporting to the Audit Committee twice a year. Intercompany loans denominated in foreign currencies are entered into to finance certain subsidiaries and expose the Group to fluctuations in exchange rate. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies. Currency transactional risk: The Group has some transactional currency exposure that arises from sales or purchases by an operating unit in currencies other than the unit’s functional currency. The transactional foreign currency risk mainly arises from open positions in the Belgian entities against the U.S. dollar. Approximately 15 percent of the Group’s sales are denominated in currencies other than the

b) Other market risks The Group is exposed to securities risk because of commercial paper and shares held by the Group in the context of its excess cash management. Risk is mitigated by a conservative selection of highly rated, highly liquid investment products. However, the Company cannot foresee sudden changes in the ratings of these products or market changes that may impair liquidity. 2.1.2 Credit risk The Group has no significant exposure to credit risk. The Company policy for large contracts is to have appropriate letters of credit issued prior to delivery of the equipment. The Company has also a general agreement with the Belgian national export credit insurance institution (OND) that provides systematic coverage of all large equipment transactions.

2.1.3 Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount in outstanding credit facilities. Due to the dynamic nature of the underlying businesses, Group Treasury aims to maintain flexibility in funding by keeping credit lines available. In late 2009, IBA strengthened the availability of financing by obtaining a long-term credit facility of EUR 50 million from the EIB (European Investment Bank) to provide financing for research and development projects. Under the terms of the facility, the Group agreed to comply with specific covenants regarding the Group’s debt. The Group has credit lines totaling EUR 100 million, of which one third has been utilized to date. In addition, in the context of its proton therapy contracts, IBA has negotiated a manufacturing credit facility of EUR 60 million that can be utilized over four years beginning December 31, 2009.

With respect to its Pharmaceuticals business segment, the Company has instituted a trade credit insurance policy in the United States. For the rest of the world, owing to the generally public nature of the customers, risk can be held at acceptable levels by closely monitoring customer payments. The table in section 2.2 presents the financial assets of the Group by valuation method. The carrying amount of these financial assets represents the maximum credit exposure of the Group. The fair value of a financial instrument is the price at which a party would accept the rights and/or obligations of this financial instrument from another independent party.

IBA annual report 2009 | 53

IFRS consolidated financial

functional currency of the operating unit making the sale, while almost 92 percent of costs are denominated in the unit’s functional currency. Where the Group considers that there are no natural hedging opportunities, forward exchange contracts and forward currency options are used to cover currency exposure.

The table below summarizes the maturity profile of the Group’s financial liabilities. December 31, 2008 (EUR '000)

Due

< 1 year

1-2 years

2-5 years

> 5 years

Total

0 0 645 11 875 5 143 17 663

3 562 3 390 5 296 59 643 100 635 172 526

2 996 4 431 517 0 7 788 15 732

3 298 1 081 0 0 16 419 20 798

0 0 0 0 29 097 29 097

9 856 8 902 6 458 71 518 159 082 255 816

Due

< 1 year

1-2 years

2-5 years

> 5 years

Total

403 0 0 14 597 8 678 23 678

2 025 1 924 267 33 667 114 033 151 916

2 861 1 123 0 0 43 705 47 689

294 1 451 0 0 4 273 6 018

0 643 0 0 7 281 7 924

5 583 5 141 267 48 264 177 970 237 225

Financial liabilities Bank borrowings Finance lease liabilities Other interest-bearing liabilities Trade payables Other ST & LT payables TOTAL December 31, 2009 (EUR '000) Passifs financiers Bank borrowings Finance lease liabilities Other interest-bearing liabilities Trade payables Other ST & LT payables TOTAL

2.1.4 Interest rate risk The Group exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. The Group entered into interest rate swaps in order to limit the impact of interest rate fluctuation on its financial results. IBA does not apply hedge accounting to these transactions, and these instruments are therefore revalued through profit and loss. IBA analyzed the impact of a 1 percent fluctuation in interest rates on its consolidated income statement. The effect would have been insignificant.

54 | IBA annual report 2009

2.1.5 Commodity risk The Group’s large automotive fleet for its U.S. radiopharmaceutical distribution business exposes it to fluctuations in the price of gasoline. The Group enters into contracts to hedge petroleum product price fluctuations as it deems necessary. The existing contract matures in January 2010. Such contracts do not qualify for either hedge accounting or fair value hedge accounting. These hedges are therefore adjusted through profit or loss.

December 31, 2008 (EUR '000) Financial assets Trade receivables Long-term receivables on contracts in progress Available-for-sale financial assets Long-term receivables for decommissioning of sites Other long-term receivables Non-trade receivables and advance payments Other short-term receivables Other investments Investments in structured products Cash and cash equivalents Hedging derivative products Derivative products – other TOTAL Financial liabilities Bank borrowings Finance lease liabilities Other interest-bearing liabilities Trade payables Hedging derivative products Derivative products – other Other long-term liabilities Amounts due to customers for contracts in progress Social security liabilities Other short-term liabilities Short-term tax liabilities Short-term bank credit TOTAL

Category Loans and receivables Loans and receivables Available for sale Loans and receivables Loans and receivables Loans and receivables Loans and receivables Available for sale FVPL2 Loans and receivables Hedge accounting FVPL2

FLAC FLAC FLAC FLAC Hedge accounting FVPL1 FLAC FLAC FLAC FLAC FLAC FLAC

December 31, 2009

Net carrying value

Fair value

Net carrying value

Fair value

74 820

70 178

29 097

39 591

28 525 1 418

32 192 1 395

5 328

6 009

31 877

17 414

10 464

9 455

2 420 743 53 943

2 377 906 17 586

2 011 264 240 910

2 433 158 199 694

9 856 8 902 6 458 71 518 891 1 607 45 516 26 759

5 583 5 141 267 48 264 0 103 53 413 28 933

18 818 55 127 1 942 10 921 258 315

17 066 52 704 2 198 23 656 237 329

PFCA: FLAC: Financial liabilities measured at amortized cost. FVPL1: Fair value through profit or loss (held for trading) FVPL2. Fair value through profit or loss (derivative-based asset whose value could not be separated from the underlying notional value)

At December 31, 2009, the net carrying amount of these financial assets and liabilities did not deviate significantly from calculated fair value. The caption “Investments” (FVPL2), totaling EUR 0.9 million, shows the fair value of synthetic collateralized debt obligations at December 31, 2009. These synthetic colleralized debt obligations were purchased for EUR 3.0 million in the context of the contract for the sale of the proton therapy system to the University of Pennsylvania. In lieu of requiring an

advance payment guarantee, this contract protected the buyer’s down payment by placing it in an escrow account. Seeking a low risk (AAA rating), highly liquid investment, the financial institution working with IBA on this project recommended investing in the most senior tranche of these financial products. The fair value of these synthetic CDOs was determined by a financial institution. In all, revaluation to market resulted in a profit of EUR 0.1 million in 2009 (compared to a financial charge of EUR 2.2 million in 2008).

IBA annual report 2009 | 55

IFRS consolidated financial

2.2 Financial assets and liabilities, additional information The assets and liabilities of the Group are valued as follows:

The “Derivatives with a hedging relationship” captions in assets and liabilities include the fair value of forward exchange contracts. In 2009, the caption "Financial assets - Derivative products – other" mainly includes the fair value of forward exchange contracts (EUR 0.2 million). In 2008, "Financial Assets - Derivative products – other" mainly included the fair value of forward exchange contracts and forward currency options. In 2008, the caption "Financial liabilities - Derivative products – other" mainly included the fair value of oil futures contracts (EUR 1.1 million) and interest rate swaps (EUR 0.4 million). The Group may acquire and sell non-controlling interests in outside companies, as dictated by its business strategy. These investments are considered as “Available for sale.”

2.3 Categories of financial instruments Fair values of hedging instruments are determined by valuation techniques widely used in financial markets and are provided by reliable financial information sources. Fair values are based on the trade dates of the underlying transactions. The Group uses the following hierarchy to classify financial instruments recognized at fair value according to the reliability of the valuation methods used: Level 1: Fair value is based on prices quoted in active markets. Level 2: Fair value is determined using valuation techniques based almost exclusively on directly or indirectly observable inputs. Level 3: Fair value is determined using valuation techniques based to a significant extent on non-observable inputs.

(EUR '000) Hedge-accounted financial assets - Forward foreign exchange contracts - Foreign exchange options - Interest rate caps Available-for-sale financial assets Other available-for-sale assets Financial assets at fair value through profit or loss - Forward foreign exchange contracts - Foreign exchange rate swaps - Foreign exchange options - Interest rate swaps - Synthetic collateralized debt obligations Financial liabilities at fair value through profit or loss - Oil futures contracts - Forward foreign exchange contracts - Foreign exchange rate swaps

56 | IBA annual report 2009

Level 1

Level 2

Level 3

December 31, 2009

2 377

1 930 6 497 32 192 2 377

906

96 13 40 9 906

1 930 6 497 32 192

96 13 40 9

53 29 21

These hedges are deemed highly effective. These hedges generated a profit of EUR 1.1 million in 2009, compared to a loss of EUR 1.1 million in 2008. This profit has been credited directly to equity. The amount included in equity at December 31, 2008 and transferred to the income statement in 2009 is EUR 0.8 million.

Equity

Hedge instrument maturities < 1 year 1-2 years

> 2 years

At December 31, 2008 Cash flow hedges (USD)

689

510

-486

665

At December 31, 2009 Cash flow hedges (USD) Interest rate hedges

1 863 -108

614 -108

1 249 0

0 0

2.3.2 Fair value through income statement – Held for trading At December 31, 2009, the Group held an interest rate swap agreement with a notional amount of USD 0.8 million. Under this swap, the Company received a variable interest rate of 0.35 percent at December 31, 2009 and paid a rate of 8.5 percent. At December 31, 2009, the Group also held US dollar, Canadian dollar, Czech koruna, and British pound forward foreign exchange options and exchange rate swaps to hedge future cash flows in these currencies. Through its US radiopharmaceutical distribution business, the Group has some exposure to fluctuations in the price of gasoline. To manage this risk, the Group had entered into a number of futures contracts involving a notional of 52,000 gallons at December 31, 2009. These contracts mature in January 2010. As they do not qualify for hedge accounting under IAS 39, the various hedge instruments discussed in this section are measured at fair value through profit and loss. A profit of EUR 0.1 million on these hedging instruments had been credited to income at December 31, 2009, compared with a loss of EUR 2.1 million at December 31, 2008.

2.4 Capital management The Group is continually optimizing its capital structure to maximize shareholder value while keeping the financial flexibility desirable to execute strategic projects. In 2009, IBA Investments SCRL, a second-tier subsidiary of IBA SA, initiated an IBA SA stock purchase program of EUR 0.2 million (EUR 0.8 million in 2008). In light of its results for the year, the Group decided not to distribute dividends for 2009. However, this decision does not represent a change in policy, and it intends to resume dividend distribution as soon as possible. It will be recalled that the Ordinary General Meeting of May 13, 2009 approved the payment of a dividend of EUR 0.08 per share. The Group has agreed to comply with a debtto-equity ratio covenant under the terms of a EUR 50 million credit facility received from the EIB for its research and development projects. This covenant is conditional on drawings on the line of credit granted to IBA and was therefore not in effect at December 31, 2009.

IBA annual report 2009 | 57

IFRS consolidated financial

2.3.1 Hedge-accounted financial instruments At December 31, 2009, the Group held 26 forward exchange contracts and 2 foreign exchange option contracts designated as hedges of expected future USD cash flows. In comparison, at December 31, 2008, it held 20 forward exchange contracts and 12 foreign exchange option contracts for this purpose. The Group also has an interest rate cap agreement to hedge interest rate risk on a manufacturing credit facility for a proton therapy project.

3. Critical accounting estimates and judgments The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Income taxes At December 31, 2009, the Group had accumulated net operating losses of EUR 159.4 million usable to offset future taxable profits (essentially in Belgium, France, Italy, Spain, the United Kingdom, and the United States), as well as temporary differences of EUR 112.9 million. It recognized deferred tax assets of EUR 30.3 million with a view to the future use of tax losses carried forward, as well as temporary differences of EUR 1.4 million. The valuation of these assets depends on a number of judgmental assumptions regarding the future probable taxable profits of different Group subsidiaries in different jurisdictions. These estimates are established prudently on the basis of the most recent information available to the Company. If circumstances change and the final tax outcome is different from that amounts initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. In order to mitigate this risk and given the rapid evolution of the technological environment in which the Group operates, estimated taxable profits beyond a horizon of four years are not considered. (b) Provision for decommissioning costs The production of FDG (Pharmaceutical business segment) generates radiation and results in the contamination of production site facilities. This situation may require the Group to pay restoration costs to comply with regulations in these

58 | IBA annual report 2009

various jurisdictions, as well as with any legal or constructive obligations. Analysis and estimates are performed by the Group, together with its legal advisers, in order to determine the probability, timing, and amount involved in a probable required outflow of resources. Provision has been made for unavoidable costs in connection with decommissioning the sites where radiopharmaceutical agents are produced. These provisions are measured at the net present value of the best estimate of the necessary costs. At December 31, 2009, these provisions stood at EUR 36.9 million, compared with EUR 34.7 million at December 31, 2008. They were primarily for obligations in connection with a radiopharmaceutical production facility belonging to the Group's French subsidiary, CIS Bio International SAS. The French subsidiary CIS Bio International SAS has held nuclear operator status since December 2008 and as such is required to set aside restricted assets for the future decommissioning and restoration of the nuclear medicine facilities at the site in Saclay, France. At December 31, 2009, these restricted assets came to EUR 32.2 million, compared with EUR 28.5 million at December 31, 2008. In the US, approximately EUR 1.4 million has been deposited in blocked accounts in order to meet legal obligations in certain States (Illinois and California). (c) Provision for obligation to take over radioactive equipment and sources In the context of the gradual disengagement from radioactive source production (production of cobalt and cesium) at the Saclay site in France, a provision has been made to meet obligations for the takeover and disposal of used radioactive sources and certain equipment (irradiators)

(d) Revenue recognition Contracts in progress are valued at their cost of production, increased by income accrued as determined by the stage of completion of the contract activity at the balance sheet date, to the extent that it is probable that the economic benefits associated with the contract will flow to the Group. This probability is based on judgment. If certain judgmental criteria differ from those used for previously recognized revenues, the Group’s income statement is affected. When appropriate, the Company revises its estimated margin at completion to take into account the assessment of any residual risk arising from this contract over several years. When the final outcome of these uncertainties differs from initial estimations, the Group’s income statement is affected. (e) Provision for defined benefit plans IBA records provisions for the defined benefit plans of its subsidiary CIS Bio International SAS. These employee benefit provisions were calculated on the basis of the following assumptions at December 31, 2009: ➤ Discount rate: 4.7%. (5.2% at December 31, 2008) ➤ Mortality table: TH-TF 00-02. ➤ Inflation rate: 2%. ➤ Salary adjustment rate: 2.5% per annum ➤ Pension adjustment rate: 1%, excluding inflation. ➤ Retirement age: 65 for management, 63 for non-management (63 for management, 60 for non-management at December 31, 2008). See Note 27.2 for additional information.

(f) Estimating the value in use of intangible and tangible fixed assets The recoverable amounts of tangible and intangible fixed assets are determined on a “value in use” basis. Value in use is determined on the basis of IBA’s most recent business plans, as approved by the Board of Directors. These plans incorporate various assumptions made by management and approved by the Board as to how the business, profit margins, and investments will evolve. See Note 7.1 for additional information. (g) Valuation of private equity instruments IBA revalues its private equity holdings using either the discounted cash flow method or the share value assigned to them during the most recent rounds of financing. It should be noted that, at December 31, 2008, IBA had recorded an impairment of EUR 3.6 million for one private equity investment due to a downward revision of estimated gains from the use of an innovative technology. No additional impairment of financial instruments was recorded in 2009. (h) Development costs for new molecules Expenses incurred to prepare the Group’s facilities for the future commercialization of new molecules in phase 2 development are recognized as assets when management considers it likely that such molecules can be brought to market and that future revenues will offset the development costs incurred. At December 31, 2009, these capitalized expenses stood at EUR 1 million (see Note 7.2). (i) Stock options On June 19, 2009, IBA’s Board of Directors approved a three-year extension of the exercise periods for the 2004, 2005, 2006, and 2007 stock option plans, applicable to Belgian employees only. The model used to value the additional cost of this extension is Black & Scholes. This additional cost is calculated as the difference between the option value at June 19, 2009 without an extension

IBA annual report 2009 | 59

IFRS consolidated financial

in France. This provision is valued at the net present value of the most probable estimates of unavoidable costs for the treatment and disposal of these used sources. This provision is discounted based on the estimated plan for source recovery. At December 31, 2009, this provision stood at EUR 17.6 million, compared with EUR 18.9 million at December 31, 2008.

and the option value at June 19, 2009 with the three-year extension on the unexercised options remaining under the various stock option plans affected. Impact on the 2009 financial statements is minimal. Assumptions for plans without extensions Strike price at grant Expected life of option Stock price at 6/19/2009 Volatility Dividend Risk-free rate Assumptions for plans with extensions Strike price at grant Expected life of option Stock price at 6/19/2009 Volatility Dividend Risk-free rate

60 | IBA annual report 2009

The following assumptions were used for the two calculations:

2004 Plan

2005 Plan

2006 Plan

2007 Plan

6 360 1.28 6.48 47.66% 1.29% 0.93%

6 370 2.06 6.48 43.10% 1.29% 1.64%

13 672 2.33 6.48 42.72% 1.29% 1.64%

19 970 2.33 6.48 42.72% 1.29% 1.64%

2004 Plan

2005 Plan

2006 Plan

2007 Plan

6 360 4.28 6.48 39.24% 1.29% 2.79%

6 370 5.06 6.48 38.51% 1.29% 3.19%

13 672 5.33 6.48 38.10% 1.29% 3.19%

19 970 5.34 6.48 38.09% 1.29% 3.19%

Application of IFRS 8 Operating Segments to periods beginning on or after January 1, 2009 had no impact on the segment information in the Group's consolidated financial statements. The Group’s management has determined that the operating segments are the same as the previous business segments under IAS 14 Segment Information.

of new drugs for the pharmaceutical industry and biotech companies. The table on the following page provides details of the income statement for each segment. Any intersegment sales are contracted at arm’s length.

On the basis of its internal financial reports to the Board of Directors and given the Group’s primary source of risk and profitability, IBA has identified two levels of operating information: ➤ Business segment-based information (Level 1) ➤ Geographical segment-based information (Level 2) 4.1 Business segments At December 31, 2009, the Group had two primary business segments for reporting purposes: (1) Equipments and (2) Pharmaceuticals. ➤ Equipments : This segment constitutes the technological basis of the Group’s many businesses and encompasses development, fabrication, and services associated with medical and industrial particle accelerators, proton therapy systems, and a wide range of dosimetry products. ➤ Pharmaceuticals: This segment encompasses radiopharmaceuticals (production and distribution) and bioassays: - Radiopharmaceuticals. IBA is active in the area of positron emission tomography (PET), where it produces and distributes primarily fluorodeoxyglucose (FDG), a chemical compound used in molecular imaging for the diagnosis of many diseases (principally cancer). IBA also has a presence in the field of single photon emission computed tomography (SPECT). - Bioassays. IBA produces and distributes a line of biomarkers used for in vitro medical diagnosis. The Group’s HTRF® technology also gives it a presence in the in vitro screening

IBA annual report 2009 | 61

IFRS consolidated financial

4. Operating segments

Equipments (EUR ’000)

Pharmaceuticals (EUR ’000)

Group (EUR ’000)

184 276 -1 640 182 636

150 900 -929 149 971

335 176 -2 569 332 607

7 965

14 963

-2 363

22 928 -5 818 -2 637 -2 363 12 110 -6 781 5 329

Segment assets Equity-accounted investments allocated to a segment Unallocated assets (3) TOTAL ASSETS

199 979

274 741 3 643

199 979

278 384

Segment liabilities Unallocated liabilities (4) TOTAL LIABILITIES

161 100

197 020

161 100

197 020

4 453 1 816 809 291 973

18 512 10 770 2 595 -940 1 159

156 878 -1 304 155 574

204 803 -1 216 203 587

361 681 -2 520 359 161

537

-1 902

812

-1 365 -1 863 -5 125 812 -7 541 -4 752 -12 293

Segment assets Equity-accounted investments allocated to a segment Unallocated assets (3) TOTAL ASSETS

177 495

266 701 5 097

177 495

271 798

Segment liabilities Unallocated liabilities (4) TOTAL LIABILITIES

159 998

175 378

159 998

175 378

1 951 1 969 901 2 125 842

18 497 13 491 4 908 4 670 1 146

Year ended December 31, 2008 Net sales and services Intersegment sales External sales Segment result Unallocated expenses (1) Financial (expense)/income (2) Share of profit/(loss) of companies consolidated using the equity method Result before tax Tax (expense)/income (2) RESULT FOR THE PERIOD

Other segment information Capital expenditure (incl. fixed assets in companies acquired in 2008) Depreciation and impairment of property, plant, and equipment Amortization of intangible assets Non-cash expense/(income) Headcount at year-end Year ended December 31, 2009 Net sales and services Intersegment sales External sales Segment result Unallocated expenses (1) Financial (expense)/income (2) Share of profit/(loss) of companies consolidated using the equity method Result before tax Tax (expense)/income (2) RESULT FOR THE PERIOD

Other segment information Capital expenditure Depreciation and impairment of property, plant, and equipment Amortization of intangible assets Non-cash expense/(income) Headcount at year-end

474 720 3 643 32 332 510 695 358 120 209 358 329

444 196 5 097 30 350 479 643 335 376 125 335 501

(1) Unallocated expenses consist mainly of expenses for stock option plans and stock plans. (2) Cash and taxes are handled at the Group level and are therefore presented under unallocated financial/(expense)/income. (3) Unallocated assets include deferred tax assets and the assets of IBA Participations SPRL, IBA Corporate Services SA, and IBA Investments SCRL. (4) Unallocated liabilities include the liabilities of IBA Participations SPRL, IBA Corporate Services SA, and IBA Investments SCRL.

62 | IBA annual report 2009

These geographical segments have been determined on the basis of economic and political context, the degree of proximity of the business activities, and the specific risks associated with the business activities in a given geographical area. The sales figures presented below are based on customer location, whereas segment balance sheet items are based on asset location.

Year ended December 31, 2008 Net sales and services Segment assets Investments accounted for using the equity method Unallocated assets Total assets Capital expenditure (incl. fixed assets from acquisitions in 2008)

Year ended December 31, 2009 Net sales and services Segment assets Investments accounted for using the equity method Unallocated assets Total assets Capital expenditure

USA (EUR ’000)

ROW (EUR ’000)

Group (EUR ’000)

133 369

199 238

332 607

92 310 844

382 667 2 799

474 977 3 643 32 075 510 695

8 516

14 449

USA (EUR ’000)

ROW (EUR ’000)

Group (EUR ’000)

107 291

251 870

359 161

73 502 1 352

369 312 3 745

442 814 5 097 31 732 479 643

4 744

15 704

IBA annual report 2009 | 63

IFRS consolidated financial

4.2 Geographical segments The Group’s business segments operate in two main geographical areas, the United States and the rest of the world.

5. Lists of subsidiaries and equity-accounted investments At December 31, 2009, the IBA Group consisted of IBA SA and a total of 40 companies and associates in 14 countries. Of these, 33 are fully consolidated and 7 are accounted for using the equity method. The Group has elected not to use the proportional method for any of the joint companies. 5.1 List of subsidiaries Name

Country of incorporation

IBA Molecular Holding (BE 0880.070.706) IBA Pharma S.A. (BE 0860.215.596) IBA Pharma Invest S.A. (BE 0874.830.726) IBA Participations S.P.R.L. (BE 0465.843.290) IBA Investments S.C.R.L. (BE 0471.701.397) IBA Corporate Services S.A. (BE 0471.889.261) Molecular Imaging S.A. (BE 0819.674.051) IBA RadioIsotopes S.A. (BE 0466.749.548) (1) Ion Beam Beijing Medical Appliance Technology Service Co. Ltd. Ion Beam Applications Co. Ltd. IBA RadioIsotopes France S.A.S. IBA Dosimetry Gmbh IBA Molecular Imaging (India) Pvt. Ltd. IBA RadioIsotopi Italia S.r.L. IBA Molecular Spain S.A. MediFlash Holding A.B. IBA Dosimetry A.B. IBA Molecular UK limited IBA Dosimetry North America Inc. IBA Proton Therapy Inc. IBA Industrial Inc. IBA Molecular North America Inc. RadioMed Corporation IBA USA Inc. IBA Molecular Montreal Holding Corp. BetaPlus Pharma S.A. (BE 0479.037.569) IBA Particle Therapy Gmbh Radiopharma Partners S.A. (BE 0879.656.475) CIS Bio International S.A.S. Cis Bio Spa Cis Bio Gmbh Cis Bio US Inc. IBA Bio Assays S.A.S. IBA Molypharma S.L.

Belgium Belgium Belgium Belgium Belgium Belgium Belgium Belgium China China France Germany India Italy Spain Sweden Sweden UK USA USA USA USA USA USA USA Belgium Germany Belgium France Italy Germany USA France Spain

Share of equity held (%)

Change in % held compared to December 31, 2008

100% 100% 61.9% 100% 100% 100% 100% 0.0% 100% 100% 100% 100% 61.9% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 75% 100% 100% 100% 100% 100% 100% 100% 100%

100% -99.73% 100% 100%

(1) On December 1, 2009, this entity was merged with IBA Pharma

IBA Bio Assays SAS, Molecular Imaging SA, and IBA Molypharma SL were established in 2009 and therefore do not give rise to goodwill. 5.2 5.2 List of equity-accounted investments Name

Country of incorporation

Striba Gmbh Pharmalogic Pet Services of Montreal Cie PetLinq L.L.C. Radio Isotope Méditerranée Molypharma Swan Isotopen AG Sceti Medical Labo KK

Germany Canada USA Morocco Spain Switzerland Japan

64 | IBA annual report 2009

Share of equity held (%)

Change in % held compared to December 31, 2008

50% 48% 40% 25% 24.5% 20.2% 39.8%

20.2% -

6.1 Acquisition of companies In January 2009, IBA purchased stock issued through a capital increase by the Swiss company Swan Isotopen AG. The net acquired assets and goodwill arising from its January 2009 purchase of equity in Swan Isotopen AG are as follows: Fair value

Carrying amount of net acquired assets

Cash and cash equivalents Other receivables Property, plant, and equipment Intangible fixed assets Trade payables Other payables Net acquired assets (CHF ‘000) Net acquired assets (EUR ‘000)

800 14 163 35 -12 -72 928 623

Price paid (EUR ‘000)

669

- Cash Fair value of net acquired assets (EUR ‘000)

669 623

(CHF '000)

Goodwill (EUR ‘000)

Determination of goodwill arising on the May 31, 2008 acquisition of CIS Bio International SAS and its subsidiaries (acquisition of the additional 80.1 percent interest in Radiopharma Partners SA) was finalized in May 2009, as follows: (EUR '000) Cash and cash equivalents Trade and other short-term receivables Inventories Property, plant, and equipment Intangible fixed assets Investments accounted for using the equity method Other long-term assets Trade and other short-term payables Provisions Borrowings Other long-term liabilities Net acquired assets

Fair value

Carrying amount of net acquired assets

66 617 45 221 23 643 18 098 28 859 133 10 362 -69 549 -89 215 -9 626 -83

66 617 45 221 16 528 16 615 23 398 133 3 194 -69 549 -87 749 -9 626 -83

24 460

4 699

Final goodwill arising on the inclusion of CIS Bio International SAS and its subsidiaries in the scope of consolidation of the IBA Group is as follows: (EUR '000)

Carrying amount of net acquired assets

Price paid (EUR ‘000) - Cash - Value of call option for 15% of shares - Direct acquisition-related expenses

22 178 18 736 2 784 658

Fair value of net acquired assets (80.1%)

19 592

Goodwill (EUR ‘000)

2 586 IBA annual report 2009 | 65

IFRS consolidated financial

6. Business combinations and other changes in the composition of the group

At December 31, 2008, the contribution of CIS Bio International SAS to Group REBIT was EUR 1.2 million. Its contribution to net profit from continuing operations was EUR 10.4 million. If CIS Bio International SAS had been acquired on January 1, 2008, at year-end the Group’s net result would have been -EUR 6.3 million, and sales and services would have been EUR 381.7 million. 6.2 Disposal of companies In September 2009, the Group sold its subsidiary IBA Advanced Radiotherapy AB. Net assets disposed of in this sale were as follows:

(SEK '000) Cash and cash equivalents Trade receivables Other receivables Inventories Property, plant, and equipment Trade payables Other payables Provisions Net assets disposed (SEK ‘000) Net assets disposed (EUR ‘000) Price received (EUR '000) - Cash Fair value of net assets disposed of (EUR ‘000) Goodwill (EUR ‘000)

66 | IBA annual report 2009

Fair value 166 3 791 310 4 856 23 -5 886 -1 299 -1 500 461 51 0 0 51 (51)

Carrying amount of net acquired assets 166 3 791 310 4 856 23 -5 886 -1 299 -1 500 461

7.1 Goodwill Movements of goodwill are detailed as follows: (EUR ‘000) At January 1, 2008 Final adjustments to previously acquired goodwill

26 538 0

Additions through business combinations Goodwill impairment Currency translation difference At December 31, 2008

2 586* 0 812 29 936*

At January 1, 2009 Final adjustments to previously acquired goodwill Additions through business combinations Goodwill impairment Currency translation difference At December 31, 2009

29 936 0 0 0 -373 29 563

(*) The consolidated financial position at December 31, 2008 has been adjusted to reflect the final purchase price allocation for CIS Bio International SAS and its subsidiaries. This resulted in an upward adjustment of EUR 1.2 million in goodwill, offset by provisions.

The goodwill generated by an acquisition is allocated to the cash-generating units (CGUs) concerned, and an impairment test is carried out annually on the CGUs’ fixed assets (including goodwill). In 2008, inclusion of CIS Bio International SAS and its subsidiaries resulted in the recognition of goodwill of EUR 2.6 million. Goodwill from the acquisition of 19.9 percent of Sceti Medical Labo KK on May 31, 2008 is included in the value of the equity-accounted investment. Additions to goodwill in 2008 and were allocated to the Pharmaceuticals segment. The following table summarizes allocation of the carrying amount of goodwill by business segment: (EUR ‘000)

Equipments

Pharmaceuticals

Group

3 548 3 618

26 388 25 945

29 936 29 563

Post-tax discount rate applied, 2008 Long-term growth rate, 2008 (*)

9.00 % 2.60 %

9.20 % 2.60 %

Post-tax discount rate applied, 2009

10.86 %

10.76 %

2.60 %

3.00 %

December 31, 2008 December 31, 2009

Long-term growth rate, 2009 (*) (*) Rate consistent with expected growth in the segment

IBA annual report 2009 | 67

IFRS consolidated financial

7. Goodwill and other intangible assets

The recoverable amounts of subsidiaries’ fixed assets have been determined on a “value in use” basis. Value in use has been determined on the basis of IBA’s latest business plans, as approved by the Board of Directors in the context of the strategic plan. The cash flows beyond a four-year period have been extrapolated using the growth rates shown in the table above. Impairment testing uses gross budgeted operational margins estimated by management on the basis of past performance and

future development prospects. Discount rates used reflect the specific risks related to the segments in question. If the growth rate is decreased by 100 basis points and the discount rate is increased by 100 basis points, the recoverable amount remains greater than the carrying amount of the tested assets. No impairment was identified in 2008 or 2009.

7.2 Other intangible assets Software

Patents and trademarks

Development costs

Other

Total

Gross carrying amount at January 1, 2008 Additions Disposals Transfers Changes in consolidation scope Currency translation difference Gross carrying amount at December 31, 2008

4 272 1 101 -66 32 3 147 128 8 614

1 807 4 306 -64 -124 15 435 7 21 367

1 015 257 -41 238 0 -11 1 458

5 046 378 -57 1 143 38 584 154 45 248

12 140 6 042 -228 1 289 57 166 278 76 687

Accumulated depreciation at January 1, 2008 Additions Disposals Transfers Changes in consolidation scope Currency translation difference Accumulated depreciation at December 31, 2008

2 842 906 -4 -58 2 887 42 6 615

1 275 307 -64 0 10 232 3 11 753

604 198 -41 0 0 11 772

2 800 1 993 -57 52 14 861 130 19 779

7 521 3 404 -166 -6 27 980 186 38 919

Net carrying amount at January 1, 2008 Net carrying amount at December 31, 2008

1 430 1 999

532 9 614

411 686

2 246 25 469

4 619 37 768

8 614 1 625 -6 784 0 -51 10 966

21 367 723 -1 266 0 -3 22 352

1 458 761 -1 -340 0 13 1 891

45 248 164 0 1 211 0 -68 46 555

76 687 3 273 -8 1 921 0 -109 81 764

Accumulated depreciation at January 1, 2009 Additions Disposals Transfers Changes in consolidation scope Currency translation difference Accumulated depreciation at December 31, 2009

6 615 1 255 -6 -215 0 -35 7 614

11 753 1 143 -4 372 0 -1 13 263

772 105 0 3 0 -10 870

19 779 3 307 0 -3 0 -86 22 997

38 919 5 810 -10 157 0 -132 44 744

Net carrying amount at January 1, 2009 Net carrying amount at December 31, 2009

1 999 3 352

9 614 9 089

686 1 021

25 469 23 558

37 768 37 020

(EUR ‘000)

Gross carrying amount at January 1, 2009 Additions Disposals Transfers Changes in consolidation scope Currency translation difference Gross carrying amount at December 31, 2009

68 | IBA annual report 2009

The remaining intangible assets have to do primarily with the value of customer relationships, which are amortized over the anticipated life of these relationships.

marketing expenses,” “General and administrative expenses,” and “Research and development expenses.” For details on impairment testing, see Note 7.1. No impairment of the intangible assets discussed in this Note was identified at December 31, 2008 or December 31, 2009. In 2009, the Group capitalized EUR 1.0 million in development costs for new labeled molecules.

Amortization expense for intangible assets was recognized in the income statement in the line items “Cost of sales and services,” “Sales and

IBA annual report 2009 | 69

IFRS consolidated financial

The majority of the intangible assets involve software, licenses for the production and distribution of radiopharmaceutical agents, exclusive distribution rights, development costs for new molecules, and customer lists, accounted for by applying the purchase method to acquisitions made by the Group.

8. Property, plant, and equipment Land and buildings

Plant, machinery, and equipment

Gross carrying amount at January 1, 2008 Additions Disposals Transfers Changes in consolidation scope Currency translation difference Gross carrying amount at December 31, 2008

21 465 1 153 -69 9 072 55 347 -1 794 85 174

52 863 4 346 -5 597 13 090 62 215 1 443 128 360

12 481 2 121 -1 257 2 123 3 556 -440 18 584

23 082 11 052 -29 -25 579 56 764 -8 65 282

109 891 18 672 -6 952 -1 294 177 882 -799 297 400

Accumulated depreciation at January 1, 2008 Additions Disposals Transfers Changes in consolidation scope Currency translation difference Accumulated depreciation at December 31, 2008

11 166 1 420 -48 17 48 589 232 61 376

29 874 9 888 -3 780 -9 52 660 863 89 496

9 059 2 218 -1 195 -1 3 255 161 13 497

0 -940 0 0 55 278 0 54 338

50 099 12 586 -5 023 7 159 782 1 256 218 707

Net carrying amount at January 1, 2008 Net carrying amount at December 31, 2008

10 299 23 798

22 989 38 864

3 422 5 087

23 082 10 944

59 792 78 693

Gross carrying amount at January 1, 2009 Additions Disposals Transfers Changes in consolidation scope Currency translation difference Gross carrying amount at December 31, 2009

85 174 2 002 -145 4 596 0 174 91 801

128 360 3 171 -859 9 059 0 -340 139 391

18 584 629 -1 080 33 0 80 18 246

65 282 13 298 -122 -15 609 0 -120 62 729

297 400 19 100 -2 206 -1 921 0 -206 312 167

Accumulated depreciation at January 1, 2009 Additions Disposals Transfers Changes in consolidation scope Currency translation difference Accumulated depreciation at December 31, 2009

61 376 4 296 -145 3 022 0 -211 68 338

89 496 8 913 -638 5 868 0 -655 102 984

13 497 2 275 -1 004 -116 0 -51 14 601

54 338 1 460 -95 -8 931 0 -54 46 718

218 707 16 944 -1 882 -157 0 -971 232 641

Net carrying amount at January 1, 2009 Net carrying amount at December 31, 2009

23 798 23 463

38 864 36 407

5 087 3 645

10 944 16 011

78 693 79 526

(EUR ‘000)

Furniture, Other properfixtures, and ty, plant, and vehicles equipment

Total

Other tangible fixed assets mainly include assets under construction. There are no tangible fixed assets subject to title restrictions. Depreciation expense for intangible assets was recognized in profit and loss in the line items “Cost of sales and services,” “Sales and marketing expenses,” “General and administrative expenses,” “Research and development expenses,” and “Other operating expenses.” As indicated in Note 7.1, an impairment test was carried out in respect of the non-current assets at December 31, 2008 and December 31, 2009 to verify that the carrying amounts of tangible fixed assets, intangible assets, and goodwill were justified by the recoverable amounts. The key assumptions used to calculate value in use are indicated in Note 7.1. No impairment was recognized in 2008 or 2009.

70 | IBA annual report 2009

IBA holds the following assets under finance lease contracts:

(EUR ‘000) Gross carrying value Accumulated depreciation Net carrying value

Land and buildings 12/31/2008 7 325 3 628 3 697

12/31/2009 7 325 3 799 3 526

Plant, machinery, and equipment 12/31/2008 26 236 14 037 12 199

12/31/2009 25 752 15 787 9 965

Furniture, fixtures, and vehicles 12/31/2008 41 10 31

12/31/2009 41 18 23

Details of lease payments on finance liabilities relating to leased assets are set out in Note 18.2. These amounts are included in intangible fixed assets.

10. Investments accounted for using the equity method (EUR ‘000) Investments accounted for using the equity method Other investments TOTAL

December 31, 2008

December 31, 2009

3 643 2 420 6 063

5 097 2 377 7 474

“Other investments” consist of shares in unlisted companies. These shares are revalued using either the discounted cash flow method or on the basis of the share value assigned to them during the most recent rounds of financing. 10.1 Movements in equity-accounted investments Equity-accounted companies are listed in Note 5.2. (EUR ‘000) At January 1 Share in (loss)/profit of equity-accounted investments Additions Other movements At December 31

December 31, 2008

December 31, 2009

6 038 -2 363 0 -32 3 643

3 643 812 672 -30 5 097

In January 2009, IBA acquired a 20.2 percent stake in the Swiss company Swan Isotopen AG.

IBA annual report 2009 | 71

IFRS consolidated financial

9. Lease arrangements

The Group’s holdings in its principal associates, all of which are unlisted, are as follows: (EUR ‘000) 2008 MolyPharma Pharmalogic Pet Services of Montreal Cie. PetLinq L.L.C. Radio Isotope Méditerranée Striba Gmbh Sceti Medical Labo KK(1) 2009 MolyPharma Pharmalogic Pet Services of Montreal Cie. PetLinq L.L.C. Radio Isotope Méditerranée Striba Gmbh Sceti Medical Labo KK Swan Isotopen AG

Country of incorporation

Assets

Liabilities

Revenue

Profit/(Loss)

% Interest

Spain Canada

10 174 2 956

5 952 2 626

10 686 4 111

574 100

24.5% 48.0%

USA Morocco Germany Japan

306 5 374 80 368 4 571

680 4 342 80 348 4 330

1 276 0 849 1 332

-355 -145 1 -79

40.0% 25.0% 50.0% 39.8%

Spain Canada

12 122 3 402

6 687 1 818

12 541 5 306

1 205 1 150

24.5% 48.0%

USA Morocco Germany Japan Switzerland

340 4 719 92 997 4 430 4 446

694 4 407 92 976 3 873 1 749

1 280 0 949 6 616 1

-67 -820 1 341 -390

40.0% 25.0% 50.0% 39.8% 20.2%

(1) Fiscal year ends September 30. Figures are at December 31, 2008 (three months of operations).

At December 31, 2009, outstanding balances with equity-accounted companies totaled EUR 2.7 million for long-term assets and EUR 0.3 million for amounts owed to customers on contracts in progress. 10.2 Jointly controlled companies In 2006, IBA formed a joint venture named Striba GmbH with Strabag Projektenwicklung GmbH (Germany). This joint-venture will provide a proton therapy system and related medical technology to the Universitätsklinikum Essen (North-Rhine, Westphalia, Germany). The assets and liabilities of this joint venture (consolidated using the equity method) are as follows: December 31, 2008

December 31, 2009

Assets Non-current assets Current assets TOTAL

(EUR ‘000)

0 80 368 80 368

0 92 997 92 997

Liabilities Non-current liabilities Current liabilities TOTAL

0 80 348 80 348

0 92 976 92 976

849 848 1

949 948 1

Net assets Revenue Expense/(income) Result after tax

72 | IBA annual report 2009

(EUR ‘000)

December 31, 2008

December 31, 2009

Deferred tax assets - Deferred tax asset to be recovered after more than 12 months - Deferred tax asset to be recovered within 12 months TOTAL

28 682 5 304 33 986

24 573 7 159 31 732

Deferred tax liabilities - Deferred tax liabilities to be paid after more than 12 months - Deferred tax liabilities to be paid within 12 months TOTAL Net deferred tax assets

286 184 470 33 516

659 345 1 004 30 728 (EUR ‘000)

Deferred tax assets At January 1, 2008 Credited/(charged) to the income statement Acquisition of companies Currency translation difference At December 31, 2008 Credited/(charged) to the income statement Acquisition of companies Currency translation difference At December 31, 2009

33 312 - 6 552 7 063 163 33 986 - 2 090 0 -164 31 732 (EUR ‘000)

Deferred tax liabilities At January 1, 2008 (Credited)/charged to the income statement Acquisition of companies Currency translation difference At December 31, 2008 (Credited)/charged to the income statement Acquisition of companies Currency translation difference At December 31, 2009

369 17 84 0 470 524 0 10 1 004

Deferred income tax assets are recognized as tax loss carry-forwards to the extent that it is likely they can be recovered through future earnings. Note 3 explains the estimates and judgments used by IBA in making this assessment. At December 31, 2009, deferred taxes of EUR 61.3 million (EUR 19.7 million in 2008) were not recognized as assets on the balance sheet. Tax losses and temporary differences do not have expiration dates.

IBA annual report 2009 | 73

IFRS consolidated financial

11. Deferred taxes

12. Other long-term assets (EUR ‘000)

December 31, 2008

December 31, 2009

29 097 81 28 525 1 418 5 990 65 111

39 591 0 32 192 1 395 6 915 80 093

Long-term receivables on contracts in progress Receivables on disposal of subsidiaries Available-for-sale financial assets Long-term receivables for decommissioning of sites Other assets TOTAL

The French subsidiary CIS Bio International SAS has held nuclear operator status since December 2008 and as such is required to set aside restricted assets for the future decommissioning and restoration of the nuclear medicine facilities at the site in Saclay, France. At December 31, 2009, these assets, shown in “Available-for-sale financial assets,” came to EUR 32.2 million. The caption “Long-term receivables for decommissioning of sites” includes deposits of EUR 1.4 million held in blocked accounts in the U.S. in order to meet legal obligations in certain States (Illinois and California). Long-term liabilities arising from contracts in progress include down payments of EUR 39.6 million (EUR 29.1 million in December 2008) on proton therapy contracts for which the corresponding receivable amounts do not qualify for derecognition. At December 31, 2009, “Other assets” consisted primarily of EUR 3.4 million in receivables with associated companies, EUR 1.5 million in advances for the development of new labeled molecules, and amounts invested in structured products with repayment horizons of more than 12 months. At December 31, 2008, “Other assets” consisted primarily of EUR 3.0 in receivables with associated companies and amounts invested in structured products with repayment horizons of more than 12 months.

13. Inventories and contracts in progress Work in progress relates to production of inventory for which a customer has not yet been secured, while contracts in progress relate to production for specific customers in performance of a signed contract. (EUR ‘000) Raw materials and supplies Finished products Work in progress Contracts in progress Write-off on inventories and contracts in progress Inventories and contracts in progress Contracts in progress Costs to date and recognized profit Less: progress billings Contracts in progress Net amounts due to customers for contracts in progress (Note 23)

74 | IBA annual report 2009

December 31, 2008

December 31, 2009

27 278 8 568 24 032 31 882 -6 001 85 759

31 581 6 437 18 442 46 706 -6 155 97 011

160 490 -128 608 31 882

135 565 -88 859 46 706

26 759

28 933

14.1 Trade receivables Trade accounts receivable are detailed as follows: (EUR ‘000)

December 31, 2008

December 31, 2009

1 580

1 794

82 121 -8 881 74 820

74 139 -5 755 70 178

Amounts invoiced to customers on contracts in progress but for which payment has not yet been received at balance sheet date Other trade receivables Impairment of doubtful receivables (-) TOTAL

At December 31, 2009, receivables of EUR 0.9 million were given as collateral (EUR 4.4 million in 2008). At December 31, the repayment schedule for trade receivables (excluding impairments) was as follows: (EUR ‘000)

Total

Not due

<30 days

30 – 59

60 – 89

90-179

180-269

270-360

> 1 year

2008 2009

83 701 75 933

38 931 24 510

19 475 17 523

6 721 6 917

5 136 3 473

4 027 4 183

2 939 4 492

1 090 5 097

5 382 9 738

At December 31, 2009, trade receivable impairments totaled EUR 5.8 million. Changes in the provision for doubtful debts for the past two years are as follows: (EUR ‘000) At January 1, 2008 Entry to consolidation Charge for the year Utilizations Write-backs Currency translation difference

2 628 5 456 1 535 0 -812 74

At December 31, 2008 Charge for the year Utilizations Write-backs Currency translation difference At December 31, 2009

8 881 2 113 -3 593 -1 607 -39 5 755

14.2 Other receivables Other receivables on the balance sheet primarily involve advance payments on orders, deferred charges, and accrued income. Other receivables are detailed as follows: (EUR ‘000) Non-trade receivables and advance payments Deferred charges Accrued income–interest Other current receivables TOTAL

December 31, 2008

December 31, 2009

31 877 4 225 770 5 469 42 341

17 414 4 046 2 455 2 954 26 869

IBA annual report 2009 | 75

IFRS consolidated financial

14. Trade and other receivables

15. Cash and cash equivalents (EUR ‘000)

December 31, 2008

December 31, 2009

24 290 64 29 589 53 943

12 512 142 4 932 17 586

Cash Restricted cash Short-term bank deposits and commercial paper TOTAL

At December 31, 2009, the effective interest rate on the cash position was 2.16 percent (4.2 percent in 2008). Short-term deposits and commercial paper have an average maturity of less than 30 days.

16. Capital stock and share-based plans 16.1 Capital stock Number of shares Balance at January 1, 2008 Stock options exercised Defrayment of loss by reduction of capital surplus Purchase of treasury shares Balance at December 31, 2008 Stock options exercised Secondary equity offering Purchase of treasury shares Balance at December 31, 2009

25 800 252 218 234 544 611

36 215 306 764

115 199 523 8 636

26 563 097 34 220 121 838

37 285 48 172

124 358 103 327

26 719 155

37 505

124 788

The Board of Directors approved a secondary equity offering of EUR 9.4 million at its meeting of June 23, 2008 in the context of the purchase of IRE's 80.1 percent interest in Radiopharma Partners SA. At December 31, 2009, 59.34 percent of IBA’s stock was trading on Euronext. Full details of the Group’s shareholders are set out in the section “The stock market and shareholders” on page 122 of this annual report. While the Group will not distribute dividends for 2009 this year, its dividend distribution policy remains unchanged, and it intends to resume distribution as soon as possible. In 2009, a dividend of EUR 2.2 million (EUR 0.08 per share) was distributed on 2008 earnings.

76 | IBA annual report 2009

Capital stock Capital surplus Treasury shares (EUR ‘000) (EUR ‘000) (EUR ‘000)

Total (EUR ‘000)

-6 746

144 668 829 9 400

-817 -7 563

-817 154 080 151 499 -1 952 152 778

-1 952 -9 515

16.2 Stock options and share-based payments Group employees and management can purchase or obtain IBA stock through various stock option and stock plans. Option strike prices are set at the market price of the underlying stock on the date of grant. In the case of the stock plans, the benefit awarded is either the market value of the stock at the grant date or a discount of 16.67 percent on the value of the stock at the grant date. Stock ownership vests irrevocably on the date of grant. However, stock must be held for three years following grant. In the case of stock option plans, the fair value of the benefit awarded is measured using a Black & Scholes model, as described below. The benefit granted is recognized as an employee expense, and the share-based payment reserve is increased accordingly. During the period ended December 31, 2009, IBA had eight stock option plans, including a new plan instituted in 2009.

Stock option plans instituted from 2002 onwards have the following vesting scheme: 20 percent vesting at grant date + 1 year, 40 percent at grant date + 2 years, 60 percent at grant date + 3 years, 80 percent at grant date + 4 years, 100 percent at grant date + 5 years.

this action, on March 13, 2006, IBA’s Board of Directors approved a reduction in the exercise price for IBA employee stock option plans instituted in 2000, 2001, 2002, and 2004. Under IFRS 2, this repricing qualifies as a modification of the terms of options granted under the 2000, 2001, 2002, and 2004 plans. This change had an impact of EUR 0.2 million on the 2008 financial statements and EUR 0.04 million on the 2009 financial statements. Details of the plans instituted in the course of 2009 and 2008 are given below.

In 2005, the Group refunded a capital surplus of EUR 3.1 per share to its shareholders. Following

Type of plan Date of grant Number of options granted Exercise price Share price at date of grant Contractual life (years) Settlement Expected volatility Expected option life at grant date (years) Risk-free interest rate Expected dividend (stated as % of share price at grant date) Expected departures at grant date Fair value per granted option at grant date Valuation model

December 31, 2008

December 31, 2009

Stock option 11/30/2008 111 903 14.18 8.74 6 Stock 36.66% 4.75 3.27% 1% 3.5% 1.60 Black & Scholes

Stock option 11/30/2009 435 771 8.26 9.17 6 Stock 40.00% 4.75 2.46% 1% 3.5% 3.78 Black & Scholes

IBA annual report 2009 | 77

IFRS consolidated financial

The stock option plans set up in 2000 and 2001 have the following vesting scheme: 25 percent vesting at grant date + 1 year, 50 percent at grant date + 2 years, 75 percent at grant date + 3 years, 100 percent at grant date + 4 years.

At December 31, 2009, a charge of EUR 1.8 million was recognized in the pre-tax financial statements for employee stock options.

The Company uses the Black & Scholes model to price options, with no vesting conditions other than time. Expected volatility for the stock option plans is based on historical volatility determined by statistical analysis of daily share price movements.

The stock options outstanding at December 31, 2009 have the following expiration dates and exercise prices. Changes since December 31, 2008 are due to the extension of the stock option plans (see Note 3) and the new 2009 stock option plan.

The fair value of shares for the stock options plans was based on the average share price for the 30 days preceding the grant date.

December 31, 2008 Expiration date

Exercise price (EUR)

February 28, 2009 September 30, 2010 December 31, 2010 September 30, 2011 August 31, 2012 September 30, 2012 September 30, 2013 September 30, 2013 September 30, 2014 September 30, 2014 September 30, 2015 September 30, 2015 September 30, 2016 TOTAL outstanding stock options circulation

Number of stock options

24.90 3.72 12.60 6.37 3.34 13.64 19.94 14.18 -

167 148 689 300 123 625 90 000 316 457 437 250 338 246 111 903 2 273 929

December 31, 2009 Exercise price (EUR) 3.72 12.60 6.37 3.34 13.64 19.94 3.72 14.18 6.37 13.64 8.26 19.94

Number of stock options 374 620 123 625 40 913 316 337 331 408 257 025 289 580 111 903 40 087 105 842 435 771 81 221 2 508 332

Stock option movements can be summarized as follows: December 31, 2008

Expiration date Outstanding at January 1 Granted Forfeited (-) Exercised (-) Lapsed (-) Outstanding at December 31 Exercisable at December 31

78 | IBA annual report 2009

Average exercise price in EUR per share

Number of stock options

9.85 14.18

2 380 260 111 903

3.80

-218 234

10.65

2 273 929 1 259 444

December 31, 2009 Average exercise price in EUR per share

Number of stock options

10.65 8.26 24.90 4.42

2 273 929 435 771 -167 148 -34 220

9.37

2 508 332 1 402 407

(EUR ‘000) Hedging reserves Other reserves Currency translation difference Retained earnings

According to the Belgian Code of Company Law, the legal reserve must equal at least 10 percent of the Company’s capital stock. Until such time as this level is attained, a top slice of at least onetwentieth of the net profit for the year (determined according to Belgian accounting law) must be allocated to building this reserve fund. The hedging reserve includes changes in the fair value of financial instruments used to hedge cash flows of future transactions. Other reserves involve the fair value adjustment of available-for-sale investments, the valuation of employee stock option plans and share-based employee payments, and actuarial gains and losses on defined benefit plans. Cumulative translation difference includes differences related to the translation of financial statements of consolidated entities whose functional currency is not the euro. It also includes

December 31, 2008

December 31, 2009

689 8 531 -17 064 5 446

1 755 14 322 -16 377 -9 117

foreign exchange differences arising on long-term loans that are part of the Group’s net investment in foreign operations. In 2009, after-tax profits of 1.95 million on the retranslation of these loans were reclassified to equity in order to offset gain or loss arising on the translation of net investment in subsidiaries. At December 31, 2009, the following intersubsidiary loans were designated as net Group investments in foreign operations: ➤ IBA SA loan to IBA USA Inc.: USD 2.33 million ➤ IBA SA loan to IBA Molecular North America Inc: EUR 3.4 million ➤ IBA SA loans to IBA Molecular UK limited: EUR 1.8 million and GBP 2.6 million ➤ IBA Pharma SA loan to IBA Molecular UK Limited: EUR 11.95 million ➤ IBA Molecular Holding SA loan to IBA Molecular UK Limited: EUR 1.2 million

18. Borrowings (EUR ‘000)

December 31, 2008

December 31, 2009

Non-current Bank borrowings (Note 18.1) Other borrowings (Note 18.3) Financial lease liabilities (Note 18.2) TOTAL

6 295 2 5 588 11 885

3 155 0 3 217 6 372

Current Short-term bank loans Bank borrowings (Note 18.1) Other borrowings (Note 18.3) Financial lease liabilities (Note 18.2) TOTAL

10 921 3 561 6 455 3 314 24 252

23 656 2 428 267 1 924 28 275

IBA annual report 2009 | 79

IFRS consolidated financial

17. Reserves

18.1 Bank borrowings (EUR ‘000)

December 31, 2008

December 31, 2009

6 295 3 561 9 856

3 155 2 428 5 583

December 31, 2008

December 31, 2009

10 953 503 -3 397 1 714 0 83 9 856

9 856 172 -4 468 0 0 23 5 583

December 31, 2008

December 31, 2009

3 562 2 996 3 298 0 9 856

2 428 2 861 294 0 5 583

Non-current Current TOTAL

Changes in bank borrowings are as follows: (EUR ‘000) Opening amount New borrowings Repayment of borrowings Entry to consolidation Exit from consolidation Currency translation difference Closing amount

The maturities of bank borrowings are detailed as follows: (EUR ‘000) One year or less Between 1 and 2 years Between 2 and 5 years Over 5 years TOTAL

The effective interest rates for bank borrowings at the balance sheet date were as follows: December 31, 2008 Bank borrowings

EUR 5,97%

USD 7,07%

December 31, 2009 EUR 5,22%

USD 6,33%

The carrying amounts of the Group’s borrowings are denominated in the following currencies: (EUR ‘000) EUR USD

December 31, 2008

December 31, 2009

8 030 1 826 9 856

4 530 1 053 5 583

December 31, 2008

December 31, 2009

0 40 918

0 77 970

0 40 918

0 77 970

Unutilized credit facilities are as follows: (EUR ‘000) Floating rate - Expiring within one year - Expiring beyond one year Fixed rate - Expiring within one year TOTAL

The facilities expiring within one year are annual facilities subject to review at various dates during the 12 months following the end of the fiscal year. The other facilities have been arranged to help to finance the proposed expansion of the Group’s activities.

80 | IBA annual report 2009

(EUR ‘000)

December 31, 2008

December 31, 2009

9 174 660 -4 050 2 884 0 234 8 902

8 902 117 -3 990 0 0 112 5 141

December 31, 2008

December 31, 2009

3 853 5 009 1 202 10 064 -1 162 8 902

2 151 2 997 690 5 838 -697 5 141

December 31, 2008

December 31, 2009

3 390 4 431 1 081 8 902

1 924 2 574 643 5 141

Opening amount New borrowings Repayment of borrowings Entry to consolidation Exit from consolidation Currency translation difference Closing amount

Minimum lease payments on finance lease liabilities are as follows: (EUR ‘000) One year or less From one to five years Over five years Future finance charges on financial leases (-) Present value of finance lease liabilities

The present value of finance lease liabilities is as follows: (EUR ‘000) One year or less From one to five years Over five years TOTAL

The carrying amounts of finance lease liabilities are denominated in the following currencies: (EUR ‘000) EUR RMB USD

December 31, 2008

December 31, 2009

4 634 77 4 191 8 902

3 773 3 1 365 5 141

The average interest rate paid on finance lease liabilities at December 31, 2009 was 4.51 percent (6.91 percent in 2008). 18.3 Other payables At December 31, 2008, other payables primarily involved an Industrial Development Revenue Bond issued by the Town of Islip, New York, on behalf of one of the US entities belonging to the IBA Group. This bond was repaid in January 2009.

IBA annual report 2009 | 81

IFRS consolidated financial

18.2 Financial lease liabilities Changes in financial lease liabilities are as follows:

19. Provisions

At January 1, 2008 Additions (+) Write-backs (-) Utilizations (-) Actuarial (gains) and losses for the period Reclassifications Changes in consolidation scope Currency translation difference Total movement At December 31, 2008

At January 1, 2009 Additions (+) Write-backs (-) Utilizations (-) Actuarial (gains) and losses for the period Reclassifications Changes in consolidation scope Currency translation difference Total movement At December 31, 2009

Environment

Warranties

Litigation

Defined employee benefits

Other employee benefits

Other

Total

2 835 10 344 -3 878 -1 310 0

1 453 413 -164 -737 0

3 501 367 -1 484 0 0

0 1 416 -4 795 -209 323

750 150 -102 -164 0

3 774 388 -774 - 1 409 0

12 313 13 078 -11 197 -3 829 323

0 45 510

0 0

0 21

0 23 234

-99 1 114

3 19 045

-96 88 924

-17

-24

50 706 53 541

-505 948

-1 120 2 381

19 969 19 969

899 1 649

17 283 21 057

87 232 99 545

Other employee benefits

Other

Total

Environment

Warranties

Litigation

Defined employee benefits

53 541 2 633 0 -1 699 0

948 1 010 -177 -785 0

2 381 530 -1 508 -555 0

19 969 2 152 0 -517 -1 123

1 649 202 -25 -472 0

21 057 6 698 -3 031 - 6 067 0

0 0

-40 0

0 0

40 292

0 292

-18

-9

916 54 457

63 1 011

-1 495 886

512 20 481

-295 1 354

-2 077 18 980

-2 376 97 169

99 545* 13 225 -4 741 -10 095 -1 123

(*) The consolidated financial position at December 31, 2008 has been adjusted to reflect the final purchase price allocation for CIS Bio International SAS and its subsidiaries. This adjustment had an impact of EUR 1.2 million on other provisions.

19.1 Environment Provisions for decommissioning costs related to the Group sites where radiopharmaceutical agents are produced have been recognized where an obligation exists to incur these costs. This caption also includes provisions for obligations in connection with disposing of used radioactive sources and equipment. These provisions are measured at the net present value of the best estimate of the costs that will need to be incurred. For more information on these provisions, see Note 3 of this report. 19.2 Warranties Provisions for warranties cover warranties for machines sold to customers.

82 | IBA annual report 2009

19.3 Litigation Provisions for litigation at December 31, 2009 involve labor-related disputes for which EUR 0.9 million had been set aside at December 31, 2009. 19.4 Provisions for employee benefits Provisions for employee benefits at December 31, 2009 were primarily for the following: ➤ Obligations of EUR 8.0 million incurred by CIS Bio International SAS for entitlements of employees active at year-end, in the form of benefits, supplements, and other retirement compensation not covered by the pension or insurance funds (lump-sum retirement payments, known as IDRs).

19.5 Other Other provisions at December 31, 2009 consisted primarily of the following: ➤ EUR 6.8 million for obligations incurred by CIS Bio International SAS upon formalization

of a restructuring plan (prior to joining the IBA Group). ➤ EUR 4.9 million for obligations relating to the treatment of production wastes and disposal of equipment. ➤ EUR 1.6 million for commitments made on acquisition of Schering AG's FDG business in 2006. ➤ EUR 4.1 million due to revaluation of the Group's R&D portfolio.

20. Other long-term liabilities (EUR ‘000) Advances received from local government Liabilities to shareholders Other Deferred payments on acquisitions TOTAL

December 31, 2008

December 31, 2009

16 305 0 29 210 0 45 515

13 791 0 39 622 0 53 413

In 2009, the Group received EUR 0.1 million in interest-free cash advances from the Walloon Region of Belgium and repaid EUR 1.3 million. It also reclassified advances of EUR 1.47 to other long-term liabilities. In 2008, the Group received EUR 1.2 million in interest-free cash advances from the Walloon Region of Belgium. At December 31, 2009, other long-term liabilities include down payments of EUR 39.6 million (EUR 29.1 million in December 2008) received on proton therapy contracts for which the corresponding receivable amounts do not qualify for derecognition.

IBA annual report 2009 | 83

IFRS consolidated financial

➤ Obligations of EUR 12.5 million incurred by CIS Bio International SAS for entitlements arising from the lowering of the retirement age for employees working or having worked in hazard areas (CEA General Instruction Note 119).

21. Other short-term financial assets and liabilities (EUR ‘000) Hedge-accounted financial instruments - Forward foreign exchange contracts - Foreign exchange options - Interest rate caps Instruments recognized at fair value - Forward foreign exchange contracts - Foreign exchange rate swaps - Foreign exchange options - Interest rate swaps Short-term financial assets Hedge-accounted financial instruments - Forward foreign exchange contracts - Foreign exchange rate swaps - Interest rate swaps - Oil futures contracts Instruments recognized at fair value - Forward foreign exchange contracts Short-term financial liabilities

The Group’s policy on use of financial instruments is detailed in Note 1.22 on Group accounting policies and Note 2 on financial risk management. At December 31, 2009, an amount of EUR 2.6 million recognized as a short-term financial asset represented EUR 2.4 million in cash flow hedging instruments and EUR 0.2 million in hedging instruments recognized at fair value through profit and loss. At December 31, 2008, an amount of EUR 2.3 million recognized as a short-term financial asset represented EUR 2.0 million in cash flow hedging instruments and EUR 0.3 million in hedging instruments recognized at fair value through profit and loss. At December 31, 2009, an amount of EUR 0.1 million recognized as a short-term financial liability represented hedging instruments accounted for at fair value through profit and loss. At December 31, 2008, an amount of EUR 2.5 million recognized as a short-term financial liability represented EUR 0.9 million in cash flow hedging instruments and EUR 1.6 million

84 | IBA annual report 2009

December 31, 2008

December 31, 2009

1 839 172

1 930 6 497

38 198 28

95 13 40 9 2 591

2 275

29 21

158 398 1 051

891 2 498

103

in hedging instruments recognized at fair value through profit and loss. Some of these financial instruments are designated as hedging instruments inasmuch as they hedge specific exchange rate risks to which the Group is exposed. Hedge accounting has been applied to these contracts because they are deemed to be effective hedges. For these cash flow hedges, movements are recognized directly in equity and released to the income statement to offset the income statement impact of the underlying transactions. A cumulative profit of EUR 1.8 million was credited directly to equity (in the “Hedging reserves” caption) at December 31, 2009. At December 31, 2008, this cumulative profit totaled EUR 0.7 million.

At December 31, the payment schedule for trade payables was as follows:

2008 2009

Total (‘000)

Due

<3 months

4-12 months

1-5 years

>5 years

71 518 48 264

11 875 14 597

55 857 31 868

3 786 1 799

0 0

23. Other payables (EUR ‘000)

December 31, 2008

December 31, 2009

26 759

28 933

18 818 42 323 94 2 157 1 019 1 567 7 967 100 704

17 066 30 694 80 3 042 834 3 068 14 986 98 703

Amounts due to customers on contracts in progress (or advances received on contracts in progress) Social security liabilities Accrued charges Accrued interest charges Deferred income Capital grants Non-trade payables Other Other payables

In 2008, accrued charges increased by EUR 38.8 million as a consequence of the absorption of CIS Bio International SAS. Most of this (EUR 20 million) was for work required to bring the site at Saclay, France, into compliance with safety and pharmaceutical standards. In 2009, accrued charges declined as a result of a total of EUR 9.5 million for modernization work carried out on the Saclay facility.

24. Other operating expenses and income 24.1 Other operating expenses Les autres charges d'exploitation peuvent être détaillées comme suit : (EUR ‘000) Legal costs Cost of share-based payments Depreciation and impairment Amortization of revaluation to fair value of assets on the balance sheet of CIS Bio International SAS Revaluation of R&D portfolio Other TOTAL

December 31, 2008

December 31, 2009

0 2 052 9 480 5 851

345 1 845 2 423 3 079

0 1 488 18 871

9 140 2 055 18 887

At December 31, 2009, the “depreciation and impairment” caption includes depreciation of the radiopharmaceutical business (EUR 2.4 million). At December 31, 2008, depreciation and impairment included an impairment of a third-party investment (EUR 3.7 million) and depreciation on decommissioning assets relating to the radiopharmaceutical business (EUR 5.4 million).

IBA annual report 2009 | 85

IFRS consolidated financial

22. Trade payables

24.2 Other operating income Other operating income can be broken down as follows: (EUR ‘000) Reversal of provisions for legal costs (see Note 29) Reversal of provisions for post-employment benefits (see Note 27.2) Reversal of provisions for other employee benefits Reversal of depreciation and impairment CEA contribution to restricted assets Gains on sale of fixed assets Earn-out on sale of a CIS Bio International SAS subsidiary Other TOTAL

December 31, 2008

December 31, 2009

-1 484 - 4 795 -103 - 2 226 -14 050 -1 679 0 -893 -25 230

-1 438 0 -953 0 0 0 -2 123 - 3 839 -8 353

In 2009, the caption “Other” primarily includes discharge of the King Cheers debt (EUR 3.0 million) by reversal of an impairment provision for a loan on IBA’s books. In 2008, the caption “Reversal of depreciation and impairment" primarily included the reversal of a write-down taken during a prior period on a receivable of EUR 2.2 million with an associated undertaking. In December 2008, the French subsidiary CIS Bio International SAS obtained nuclear operator status, which will eventually make it mandatory to set aside restricted assets to cover the future restoration and decommissioning of the nuclear facilities at the site in Saclay, France. In this context, CIS Bio International SAS signed a memorandum of agreement with the CEA (Commissariat à l’Energie Atomique, Atomic Energy Commission), a public institution organized under French law on whose site the nuclear facilities of CIS Bio International SAS had previously been located. The CEA agreed to pay monetary compensation of EUR 14.05 million to definitively extinguish its obligation to contribute to the future costs of restoring and decommissioning the nuclear facilities of CIS Bio International SAS. In 2008, the Group also sold the assets at two radiopharmaceutical production facilities in the United States, which generated gains of EUR 1.7 million.

25. Financial expenses and income 25.1 Financial expenses (EUR ‘000) Interest paid on debts Foreign exchange differences Changes in fair value of derivatives Other TOTAL

86 | IBA annual report 2009

December 31, 2008

December 31, 2009

1 945 3 444 2 266 5 929 13 584

2 386 3 636 1 393 4 575 11 990

At December 31, 2008, the caption “Other” mainly reflected the impact of revaluation of financial assets to fair value through profit and loss (EUR 2.26 million) (see Note 2.2), the cost of discounting defined benefit retirement plans (EUR 0.7 million), and expenses related to the discounting of decommissioning provisions (EUR 1.97 million.) 25.2 Financial income (EUR ‘000) Interest received on receivables and cash Foreign exchange differences Changes in fair value of derivatives Other TOTAL

December 31, 2008

December 31, 2009

-2 616 -5 728 -611 - 1 992 -10 947

-2 680 -2 630 -1 249 - 306 -6 865

At December 31, 2009, the caption “Other” mainly includes the impact of revaluation of financial assets to fair value through profit and loss (EUR 0.16 million). At December 31, 2008, the caption “Other” mainly reflected the impact of revaluation to fair value of an option allowing the Group to increase its percentage ownership in CIS Bio International SAS and subsidiaries (EUR 1.35 million).

26. Income taxes The tax charge for the year can be broken down as follows: (EUR ‘000) Current taxes Deferred taxes TOTAL

December 31, 2008

December 31, 2009

212 6 569 6 781

1 446 3 306 4 752

The tax charge on IBA’s result before taxes differs from the theoretical amount that would have resulted from application of the average applicable tax rates to the profits of the consolidated companies.

IBA annual report 2009 | 87

IFRS consolidated financial

At December 31, 2009, the caption “Other” mainly includes cost of the discounting of defined benefit plans (EUR 1.1 million), as well as expenses from the revaluation of decommissioning provisions (EUR 1.62 million) and other provisions (EUR 0.5 million).

The analysis is as follows: (EUR ‘000)

December 31, 2008

December 31, 2009

Result before tax Taxes calculated on the basis of national tax rates Unrecognized deferred taxes Tax-exempt transactions Prior year adjustments on deferred taxes Write-down of previously recognized deferred tax assets Loss available for offset against future taxable income Utilization of previously recognized tax losses Local tax expense eliminated in consolidation Other tax (income)/expenses Reported tax charge

12 110 4 251 5 053 2 482 0 2 177 0 -5 240 -1 101 -841 6 781

-7 541 -2 692 4 680 2 196 81 3 047 -1 476 -1 597 123 390 4 752

Theoretical tax rate Effective tax rate

35.1% 56.0%

35.7% -63.0%

Given the available tax losses, IBA did not calculate deferred taxes on items credited or charged directly to equity.

27. Employee benefits 27.1 Defined contribution plans At December 31, 2009, the Group recognized expenses of EUR 0.9 million for defined contribution plans (EUR 0.6 million at December 31, 2008). 27.2 Defined benefit plans IBA records provisions for the defined benefit plans of its subsidiary CIS Bio International SAS. Changes in the present value of defined benefit obligations are presented as follows: (EUR ‘000) Defined benefit obligations at May 31, 2008 Cost of services rendered for the period Cost of discounting Plan termination Benefits paid Actuarial (gains) and losses for the period Defined benefit obligations at December 31, 2008 (EUR ‘000) Defined benefit obligations at January 1, 2009 Cost of services rendered for the period Cost of discounting Plan termination Benefits paid Actuarial (gains) and losses for the period Defined benefit obligations at December 31, 2009 (*) The impact of plan termination was recorded in “Other operating income” (see Note 24.2).

88 | IBA annual report 2009

December 31, 2008 23 234 694 722 - 4 795* -209 323 19 969 December 31, 2009 19 969 1 061 1 091 0* -517 -1 123 20 481

(EUR ‘000) Cost of services rendered for the period Cost of discounting Expenses/(income) for the period

December 31, 2008

December 31, 2009

694 722 1 416

1 061 1 091 2 152

Defined benefit plan expenses accounted for through profit and loss are included in the following income statement captions: (EUR ‘000) General and administrative expenses Financial expenses, other Expenses/(income) for the period

December 31, 2008

December 31, 2009

694 722 1 416

1 061 1 091 2 152

The principal actuarial assumptions at the date of closing are summarized in 3 (e) above.

28. Cash flow statement At December 31, 2009, the caption “Other noncash items” includes expenses in connection with employee stock option plans and stock plans (+EUR 1.8 million); inventory losses and write-downs, including the results of reversing asset revaluations during fair value revaluation of the balance sheet of CIS Bio International SAS (+EUR 2.3 million); the non-cash impact of discharging the loan with King Cheers (+EUR 3.0 million), and the impact of including unrealized foreign exchange differences on the revaluation of the Group’s intercompany balance sheet positions (+EUR 0.2 million). At December 31, 2009, “Other cash flows from investing activities” primarily includes investments made to bring the site at Saclay, France, into compliance with safety and pharmaceutical standards (–EUR 9.5 million) and investments in the context of an exclusive collaboration agreement to commercialize Aposense [18-F]-ML-10 (–EUR 1.5 million). At December 31, 2009, “Other cash flows from financing activities” include grants and interestfree cash advances from the Walloon Region of

Belgium (EUR 0.4 million), repayment of grants and advances from the Walloon Region of Belgium (–EUR 1.5), repayment of cash credits (–EUR 0.3 million), and changes in liabilities towards Group employees in connection with the exercise of stock option plans (EUR 0.3 million). At December 31, 2008, the caption “Other noncash items” included expenses in connection with employee stock option plans (EUR 2.1 million); inventory losses and write-downs, including the results of reversing asset revaluations during fair value revaluation of the balance sheet of CIS Bio International SAS (EUR 5.4 million); actuarial gains and losses on employee benefits (–EUR 0.3 million); the impact of revaluations and gains on the sale of fixed assets (–EUR 2.4 million); and the impact of including unrealized foreign exchange differences on the revaluation of the intercompany balance sheet positions of the Group (–EUR 1.8 million). At December 31, 2008, “Other cash flows from investing activities” included investments made to bring the site at Saclay, France, into compliance with safety and pharmaceutical standards.

IBA annual report 2009 | 89

IFRS consolidated financial

Defined benefit plan expenses recognized through profit and loss can be broken down as follows:

At December 31, 2008, “Other cash flows from financing activities” included grants and interest-free cash advances from the Walloon Region of Belgium (EUR 1.6 million), repayment of a loan to Schering

(–EUR 1.5 million), and changes in liabilities towards Group employees in connection with the exercise of stock option plans (–EUR 0.9 million).

29. Contingent liabilities The Group is currently involved in certain legal proceedings. The potential risks connected with these proceedings are deemed to be insignificant or unquantifiable or, where potential damages are quantifiable, adequately covered by provisions. Developments in litigation pending at the end of 2008 as well as the principal cases pending at December 31, 2009 are presented in this Note. Developments in old litigation pending at December 31, 2009 Litigation settled since the 2008 annual report ➤ Tax litigation in Sweden The Company became involved in a tax dispute with the Swedish National Tax Board. The case involved interest paid by the IBA Group from Belgium to an IBA Group company in Sweden from 1999 to 2001. Tax had been withheld in Belgium, and the income had been released to the taxable income of the Swedish subsidiary. The case was settled in favor of the IBA Group during the first semester of 2009. The provision of SEK 12.9 million (EUR 1.2 million) previously set aside has therefore been reversed. ➤ Action for damages against IBA Molecular North America Inc In 2005, IBA Molecular North America took over three FDG production facilities from the Pharmalogic company. One of its facilities was involved in a suit for damages. A Pharmalogic driver had used his vehicle without authorization outside working hours. He committed a theft and, while fleeing, caused an accident involving a police vehicle and injured a police officer. The case went to jury trial. On February 19, 2008, the court found Pharmalogic negligent in hiring the driver and entrusting him with a vehicle. Rather

90 | IBA annual report 2009

surprisingly, this negligence was deemed a substantial cause of the injury to the police offer, and damages of USD 3 million were awarded for which Pharmalogic is responsible. Pharmalogic was ordered to pay this amount. In 2008, acting on a post trial motion, the Court reduced the damage amount to USD 2.3 million. IBA was able later to obtain compensation from Pharmalogic’s previous insurers for the amount up to USD 500 000 and the amount in excess of USD 1 million. Subsequent to the end of the second quarter of 2009, the parties negotiated a settlement providing for a lump-sum payment of USD 1 200 000 in principal, interest, and costs and leaving IBA with a maximum liability of USD 700 000. The case was officially settled on July 24, 2009. The provision of USD 1 million set aside in 2008 was reduced to USD 0.7 million on June 30, 2009. IBA is continuing its efforts to obtain additional compensation from Pharmalogic’s previous insurers. Developments in old litigation still pending at December 31, 2009 ➤ Litigation with Bayer Schering Pharma AG IBA and Schering AG (now Bayer Schering Pharma AG) disagreed on the amount of the net cash flow position when the sale of CIS Bio International was made. Bayer Schering Pharma AG demanded a payment of EUR 0.3 million. The dispute was submitted for arbitration to KPMG France, which sided with IBA. Despite this decision, Bayer Schering Pharma AG is still

Additionally, the parties are involved in a dispute revolving around the takeover of the Japanese operations, in which Bayer Schering Pharma AG maintains that IBA and IRE have not complied with their best effort obligation. .Bayer Schering Pharma AG has submitted a counterclaim in the aforementioned arbitration proceedings demanding payment of JPY 180 076 111 and EUR 200 000 in severance compensation for the employees in question. IBA considers that it has fully complied with its best effort obligation and contends that, if only 20 of the 38 employees joined IBA, it was for reasons attributable exclusively to Bayer Schering Pharma AG. In the context of the acquisition of CIS Bio International SA, the parties agreed that Bayer Schering Pharma AG would pay an additional EUR 4 million in the event that CISBIO obtained INB (Basic Nuclear Facility) designation before December 31, 2008. A French decree of December 15, 2008 conferred INB status on CISBIO, and Bayer Schering Pharma AG was asked for the EUR 4 million. Bayer Schering Pharma AG refused to pay on the pretext that the law allows the use of means other than cash to establish the guarantee and that its contractual commitment applied only in the case of a mandatory cash reserve. IBA believes that Bayer Schering Pharma AG has no basis for its position and has instituted arbitration proceedings for payment through AFA (Association Française d’Arbitrage, French Arbitration Association). These proceedings are still pending, and no decision is expected before the end of 2010. New litigation in 2009 ➤ Invalidation of Skandion’s call for tenders for a proton therapy system in Uppsala, Sweden Skandion issued a call for tenders to supply and install of a complete proton therapy facility in Uppsala, Sweden, under a turnkey contract. The competition was conducted under the negotiated procedure. On August 19, 2009, the Joint Authority

awarded the contract to the German company Varian Medical Systems Particle Therapy, located in Varian, Germany. On December 9, 2009, in response to a claim by IBA, the Uppsala County Administrative Court issued a decision declaring the call for tenders void on six counts: i) Varian Denmark’s tender should have been rejected at the pre-tender qualification stage and should not have qualified for further evaluation. (ii) Awarding the contract to Varian Germany when the tender was submitted by Varian Denmark was a violation of the law. (iii) Skandion had violated the principle of transparency in concluding the IBA had not met the requirements designated as mandatory under “Evaluation of Technical Requirements.” (iv) It had also violated the principle of transparency in concluding that IBA had not met the mandatory requirements for practical and technical user training. IBA’s omissions on this point were exaggerated by this lack of transparency. (v) Skandion had violated the principle of equal treatment with respect both to the prequalification of tenderers and to the evaluation of tenders during the competition process. (vi) It was not possible for all of the tenderers to anticipate how Skandion would assess or evaluate the tenders. The tender documents, the evaluation of the tenders, and the evaluation method were so unclear as to violate the requirements of transparency. Skandion has not appealed this decision. It issued a new call for tenders on February 26, 2010. ➤ Arbitration against Westdeutsches Protonentherapiezentrum Essen GmbH In November 2009, STRIBA Protonentherapiezentrum GmbH, a joint venture in which IBA holds a 50 percent share, initiated arbitration against Westdeutsches Protonentherapiezentrum Essen GmbH (“WPE”) to determine, in the context of the public private

IBA annual report 2009 | 91

IFRS consolidated financial

demanding payment of this amount. However, there are no proceedings pending.

partnership, the exact extent of Striba’s contractual obligations to supply a proton therapy facility to Essen, Germany, under turnkey contract. WPE disputes the quality of the patient management software proposed by IBA. WPE considers that it is entitled to request delivery of a system currently in development for continuous treatment of mobile tumors. IBA has refused to honor this request in the context of the public

private partnership but remains open to research collaboration in this area. Given WPE’s insistence on having this system included in the public private partnership, IBA initiated arbitration proceedings in order to obtain confirmation that the system proposed by IBA followed the rules of the art and complied with the formal requirements specification with regard to both mobile tumor treatment and treatment speed, and that WPE was not entitled to reduce the fee owed to Striba.

30. Commitments 30.1 Operating leases The Group has a number of non-cancelable operating leases relating to vehicle, equipment, and office space rental. Total future minimum lease payments under non-cancelable operating leases are as follows: (EUR ‘000) One year or less From one to five years Over five years TOTAL

December 31, 2008

December 31, 2009

6 029 11 402 6 820 24 251

4 873 9 953 12 378 27 204

Total operating lease payments included in the income statement in 2009 amounted to EUR 7.3 million (EUR 5.1 million in 2008). 30.2 Financial guarantees IBA held financial guarantees for EUR 135.8 million at December 31, 2009 (EUR 90 million at December 31, 2008) given by Group entities as security for debts or commitments. Of this amount, EUR 10.3 million cover guarantees given by the parent company to cover its subsidiaries’ financial lease liabilities and bank borrowings and EUR 50 million relate to the financing given by the EIB to IBA for its research and development projects in the areas of cancer diagnosis and treatment. This guarantee is contingent on drawings on the line of credit granted to IBA.

92 | IBA annual report 2009

31.1 Consolidated companies A list of subsidiaries and equity-accounted companies is provided in Note 5. 31.2 Shareholder relationships The following table shows IBA shareholders at December 31, 2009: (EUR ‘000) Belgian Anchorage IRE (Institut des Radioéléments) Sopartec UCL IBA Investments SCRL * Ion Beam Applications SA * Public TOTAL

Number of shares

7 773 132 1 423 271 529 925 426 885 635 530 75 637 15 854 775 26 719 155

29.09% 5.33% 1.98% 1.60% 2.38% 0.28% 59.34% 100%

* At December 31, 2009, IBA held a total of 75,637 of its own shares and 635,530 through the company IBA Investments SCRL, a wholly owned indirect subsidiary.

IBA's dominant shareholders—Belgian Anchorage, Belgian Leverage, UCL, Sopartec, and IRE— have declared that they are acting jointly and have entered into an agreement which expires in 2013. In late December 2007, Belgian Leverage transferred all of its stock in IBA to its parent, Belgian Anchorage. The above shareholders’ agreement governs, inter alia, the sharing of information and preferential rights to purchase IBA stock. The parties to this agreement held 10 153 213 shares of ordinary stock at December 31, 2009, representing 38 percent of Company’s voting rights. Under the terms of this agreement, in the event of a new IBA stock offering, if one of the dominant shareholders does not exercise its preferential subscription right, this right will pass to the other dominant shareholders, with Belgian Anchorage S.A. having first right of purchase. If a party to the shareholders’ agreement wishes to sell its shares of IBA stock, the other parties to the agreement will have a preemptive right to acquire this stock, with Belgian Anchorage S.A. having first right of purchase. This preemptive right is subject to certain exceptions. In particular, it does not apply in the

case of a transfer of stock to Belgian Anchorage SA. In an agreement signed February 19, 2008, IRE granted IBA a call option on its entire interest in Radiopharma Partners (80.1 percent) and Sceti Medical Labo KK (19.9 percent). This call option was conditional on receipt of notice from IBA of compliance with French regulations applicable to CISBIO regarding the notification of employees. Should it exercise this option, IBA would pay the agreed price in a combination of cash and IBA shares. Without prejudice to the rights and obligations arising under other shareholder agreements, IRE agreed to hold these shares for five years, to grant IBA a preemptive right to purchase this stock, and to continue to strive to maintain the Belgian mooring of IBA's shareholders. On May 29, 2008, IBA exercised this call option to purchase IRE's 80.1 percent interest in Radiopharma Partners and 19.9 percent interest in Sceti Medical Labo KK. The approximately EUR 20 million price of the transaction was paid half in cash and half in IBA SA stock in order to further strengthen the historic partnership relationship between IBA and IRE, one of its founding shareholders. The cash payment will

IBA annual report 2009 | 93

IFRS consolidated financial

31. Related party transactions

provide venture capital to fund projects useful for the joint development of IRE, CIS Bio International SAS, and IBA. IBA and IRE have also agreed to develop different collaborative projects in which synergies can be optimized by pooling expertise and scientific, technical, and commercial resources. 31.3 Directors and management As indicated in the corporate charter (the “Charter”), the Company does not wish to provide specific information on individual compensation. It believes that information of this kind does not offer added value to the shareholders and is potentially harmful to the Company. However, communication of information on compensation policy is important for shareholders and is detailed in the Charter. Actual compensation in 2009 is described below. 31.3.1 Directors Fixed compensation paid to members of the Board of Directors for services rendered in 2009 totaled EUR 108 500. Managing directors were not compensated for attending meetings of the Board of Directors. Non-managing directors did not receive any compensation or other direct or indirect benefit from the Company or any other entity belonging to the Group for their services. However, with the exception of Nicole Destexhe, Peter Vermeeren, and Jean-Jacques Verdickt (J.J. Verdickt SPRL), all of the directors were included as beneficiaries of the 2009 stock option plan. Because the number of options involved is quite small, the Company believes that granting these options does not interfere with the judgment of the recipient directors. The Company considers that the amount of compensation or other benefits given directly or indirectly to individual directors by the Company or any other entity in the Group is not relevant to this report.

94 | IBA annual report 2009

31.3.2 Chief Executive Officer, managing directors, and Management Team The Board is careful to ensure that the managing directors and the Management Team are compensated for direct and indirect services to the Company in a manner consistent with market practices based on level of responsibility, services rendered, and nature of duties. As indicated in the Charter, fixed and variable compensation of the managing directors is determined by the Compensation Committee in accordance with principles approved by the Board. Fixed and variable compensation of the Management Team is reviewed and determined by the Chief Executive Officer. It has been reported to the Compensation Committee and the Board of Directors and discussed by both. The principle of launching of a 2009 stock option plan and the total number of options to be issued were approved by the Board of Directors. The Compensation Committee identified the beneficiaries of the stock options and determined the number of stock options to be granted to each of them. The total amount paid by the Company and all other entities in the Group in compensation for duties exercised and services rendered directly or indirectly by the two managing directors and the nine members of the Management Team came to approximately EUR 3.9 million in 2009: around EUR 2.9 million for fixed compensation and around EUR 1 million for variable compensation. These amounts are always stated as cost to the company. Note that fixed compensation includes a Group contribution of EUR 0.1 million to a defined contribution plan. The Company considers that the amount of compensation or other benefits given directly or indirectly to the Chief Executive Officer by the Company or any other entity in the Group is not relevant to this report.

IFRS consolidated financial

At December 31, 2009, all of the directors together held 1 508 059 shares of IBA stock directly (including 1 423 271 shares held by IRE). At the same date, the non-managing directors still held: ➤ 600 IBA stock options granted under the 2001 stock option plan ➤ 600 IBA stock options granted under the 2002 stock option plan ➤ 15 000 IBA stock options granted under the 2006 stock option plan ➤ 6 000 IBA stock options granted under the 2007 stock option plan ➤ 1 000 IBA stock options granted under the 2008 stock option plan ➤ 4 500 IBA stock options granted under the 2009 stock option plan At December 31, 2009, members of the Management Team, including the managing directors, held a total of 890 052 stock options distributed as follows: ➤ 50 000 options granted under the 2001 stock option plan at the strike price of EUR 12.60 ➤ 255 500 options granted under the 2002 stock option plan at the strike price of EUR 3.34 ➤ 156 500 options granted under the 2004 stock option plan at the strike price of EUR 3.72 ➤ 10 000 options granted under the 2005 stock option plan at the strike price of EUR 6.37 ➤ 124 000 options granted under the 2006 stock option plan at the strike price of EUR 13.64 ➤ 107 261 options granted under the 2007 stock option plan at the strike price of EUR 19.94 ➤ 55 675 options granted under the 2008 stock option plan at the strike price of EUR 14.18 ➤ 131 116 options granted under the 2009 stock option plan at the strike price of EUR 8.26 The Company believes that (i) the number of shares, stock options, or any other option purchase rights granted to the CEO or any other members of executive management during the course of the year and (ii) the principal contract provisions regarding the hiring or departure of executive managers are not relevant to this report.

IBA annual report 2009 | 95

32. Fees for services rendered by the statutory auditors Ernst & Young Reviseurs d’Entreprises SCRL, auditors of the statutory accounts of IBA SA and auditors of the consolidated accounts of IBA, provided the following services during the year: (EUR ‘000)

December 31, 2008

December 31, 2009

643 7 26 676

543 57 57 657

Remuneration for statutory audits and audit of consolidated accounts Tax-related services Other services TOTAL

33. Events after the balance sheet date On February 19, 2010, IBA issued a press release confirming that it had received an additional order for a second treatment room from its Italian customer ATreP (Agenzia Provinciale Per la Protonterapia). On February 23, 2010, IBA announced that ProCure Treatment Centers, Inc. had chosen it to supply a proton therapy system to the ProCure Proton Therapy Center in Somerset, New Jersey,

USA. This proton therapy system will include four treatment rooms – a combination of inclined beam and fixed beam treatment rooms and isocentric rotating gantry treatment rooms – with the latest patient positioning options and IBA’s Universal Nozzle, which allows pencil beam scanning. This contract also includes a long-term service and maintenance agreement. The center should open for treatment in 2012.

34. Net earnings per share 34.1 Basic earnings Basic earnings per share are calculated by dividing the net profit attributable to Company shareholders by the weighted average number of ordinary shares outstanding during the period. The weighted average number of ordinary shares excludes shares purchased by the Company and held as treasury shares. BASIC EARNINGS PER SHARE

December 31, 2008

December 31, 2009

26 264 308

26 077 237

Earnings attributable to parent equity holders (EUR ‘000) Basic earnings per share from continuing and discontinued operations (EUR per share)

5 300 0.20

-12 492 -0.48

Earnings from continuing operations attributable to parent equity holders (EUR ‘000) Weighted average number of ordinary shares Basic earnings per share from continuing operations (EUR per share)

5 300

-12 492

26 264 308 0.20

26 077 237 -0.48

26 264 308 0.00

26 077 237 0.00

Weighted average number of ordinary shares

Earnings from discontinued operations attributable to parent equity holders (EUR ‘000) Weighted average number of ordinary shares Basic earnings per share from discontinued operations (EUR per share)

96 | IBA annual report 2009

The calculation is performed for the stock options to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding stock options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the stock options. DILUTED EARNINGS PER SHARE

December 31, 2008

December 31, 2009

Weighted average number of ordinary shares Weighted average number of stock options Average share price over period Dilution effect from weighted number of stock options Weighted average number of ordinary shares for diluted earnings per share

26 264 308 1 656 632 14.03 821 762 27 086 070

26 077 237 1 061 537 7.21 500 918 26 578 155

Earnings attributable to equity holders of the parent (EUR ‘000) Diluted earnings per share from continuing and discontinued operations (EUR per share)

5 300 0.20

-12 492 -0.47

Earnings from continuing operations attributable to equity holders of the parent (EUR ‘000) Diluted earnings per share from continuing operations (EUR per share)

5 300

-12 492

0.20

-0.47

0.00

Earnings from discontinued operations attributable to parent equity holders (EUR ‘000) Diluted earnings per share from discontinued operations (EUR per share)

IBA annual report 2009 | 97

IFRS consolidated financial

34.2 Diluted earnings Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding for the effects of conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares: stock options.

Auditor's report on the consolidated financial statements

98 | IBA annual report 2009

IFRS consolidated financial IBA annual report 2009 | 99

Pursuant to the Royal Decree of November 14, 2007, IBA declares that this annual statement was prepared by Pierre Mottet, Chief Executive Officer (CEO), and Jean-Marc Bothy, Chief Financial Officer (CFO), who declare that, to their knowledge: â&#x17E;¤ The consolidated statements for 2009 have been prepared in accordance with applicable accounting standards and accurately reflect the assets, financial position, and results of IBA and the undertakings included in the consolidation; â&#x17E;¤ The management report gives a true and fair view of the business situation, the earnings, and the position of IBA and the undertakings included in the consolidation, as well as a description of the principal risks and uncertainties facing them.

100 | IBA annual report 2009

IFRS consolidated financial IBA annual report 2009 | 101

IBA S.A. annual financial statements

102 | IBA annual report 2009

ASSETS (EURÂ â&#x20AC;&#x2DC;000)

2007

2008

2009

FIXED ASSETS Formation expenses Intangible fixed assets Tangible fixed assets Land and buildings Plant, machinery and equipment Furniture and vehicles Leases and similar rights Assets under construction and advance payments Financial assets Affiliated companies Other companies Other financial assets

193 876 0 801 6 368 879 107 1 251 3 889 242 186 707 185 614 0 1 093

242 820 4 1 201 7 287 1 070 367 1 088 3 714 1 048 234 328 232 556 0 1 771

150 941 2 1 711 5 902 909 249 622 3 563 559 143 326 141 552 0 1 774

CURRENT ASSETS Accounts receivable after one year Inventories and contracts in progress Inventories Contracts in progress Amounts receivable within one year Trade debtors Other amounts receivable Investments Cash at bank and in hand Deferred charges and accrued income TOTAL ASSETS

276 022 344 190 898 10 980 179 918 50 787 46 705 4 082 3 000 29 817 1 176 469 898

444 522 297 339 775 24 810 314 966 71 359 61 709 9 650 25 654 6 855 583 687 342

558 974 47 401 849 22 113 379 736 153 108 44 183 108 925 1 596 282 2 092 709 915

IBA annual report 2009 | 103

IBA S.A. annual financial stat.

In accordance with article 105 of the Belgian Code of Company Law, the following statements represent a condensed version of the annual financial statements. The full text is available on request from the headquarters of the Company and will be filed with the National Bank of Belgium. This condensed version does not contain all of the appendices or the report of the auditor, who expressed an unqualified opinion.

LIABILITIES AND EQUITY (EUR ‘000) SHAREHOLDERS’ EQUITY Capital Additional paid-in capital Reserves Legal reserve Reserves not available for distribution Untaxed reserves Retained earnings Capital grants PROVISIONS AND DEFERRED TAXES CREDITORS Amounts payable after one year Financial debts Advances received on contracts in progress Other amounts payable Amounts payable within one year Current portion of amounts payable after one year Financial debts Trade debts Advances received on contracts in progress Current tax and payroll liabilities Other amounts payable Accrued charges and deferred income TOTAL LIABILITIES

INCOME STATEMENT (EUR ‘000) Operating income Operating expenses (-) Raw materials, consumables, and goods for resale Services and other goods Salaries, social security, and pensions Depreciation and write-offs on fixed assets Increase/(decrease) in write-downs on inventories, work in progress and trade debtors Provisions for liabilities and charges Other operating expenses Operating Profit/(Loss) Financial income Income from financial assets Income from current assets Other financial income Financial expenses (-) Interest expense Amounts written off on current assets other than inventories, work in progress and trade debtors - increase (decrease) Other financial charges Profit/(loss) on ordinary activities before taxes Extraordinary income (+) Gain on sale of fixed assets Other extraordinary income Extraordinary expenses (-) Extraordinary depreciation and write-offs on fixed assets Amounts written off financial fixed assets Other extraordinary expenses Profit/(Loss) for the period before taxes Income taxes (-) (+) Profit for the period (+) Transfer to tax free reserves (-) Profit/(Loss) for the period available for appropriation

104 | IBA annual report 2009

2007

2008

2009

152 780 36 215 115 198 989 786

167 961 37 285 124 358 1 329 1 126

203 217 161 1 940 315 178 142 937 2 126 88 375 52 436 171 074 4 337 44 933 102 229 4 092 15 483 1 167 469 898

203 4 558 430 1 371 518 009 190 183 1 757 78 981 109 445 324 859 3 710 10 000 62 026 230 601 4 203 14 319 2 968 687 342

157 526 37 505 124 788 2 019 1 126 689 203 -7 030 245 5 064 547 325 189 347 1 390 141 532 46 426 356 577 57 641 23 000 34 298 224 162 4 086 13 390 1 401 709 915

2007

2008

2009

112 102 -112 649 -54 104 -28 686 -20 309 -8 954 973

183 445 -185 127 -95 724 -45 826 -25 476 -16 203 - 808

136 626 -143 430 -47 150 -46 043 -28 029 -15 097 -1 448

1 840 -3 409 - 547 4 998 0 2 353 2 645 -5 313 -1 490 0

569 -1 658 -1 682 25 724 11 500 4 574 9 651 -13 578 -4 375 -2 271

-3 692 -1 971 -6 804 9 136 1 790 3 667 3 678 -9 055 -4 680 163

-3 823 - 862 5 735 5 735 0 -1

-6 933 10 464 17 0 17 -3 675

-4 538 -6 723 3 000 0 3 000 -7 165

0 -1 4 872 0 4 872

-3 653 - 21 6 807 0 6 807

0 -7 165 -10 888 - 10 -10 899

4 872

6 807

-10 899

Profit to distribute Dividends

STATEMENT OF CAPITAL (EUR ’000) Capital 1. Issued capital At the end of the previous financial year Changes during the financial year At the end of the financial year 2. Structure of the capital 2.1. Categories of shares • Ordinary shares without designation of face value • Ordinary shares without designation of face value with V VPR strip 2.2. Registered or bearer shares • Registered shares • Bearer shares Own shares held by • The Company itself • Its subsidiaries Share issue commitments Following exercise of share options • Number of outstanding share options • Amount of capital to be issued Maximum number of shares to be issued Amount of non-issued authorized capital

2007

2008

2009

-82 564 4 872 -87 436 87 436 87 436

7 024 6 807 217 0 0

-6 340 -10 899 4 558 0 0

244

341

689

244

341

217

4 558

0 689 -7 030

4 412 4 412

2 125 2 125

0 0

Amount (EUR '000)

Number of shares

37 285 219 37 505

156 058

20 507 16 997

14 734 590 11 984 565 9 551 367 17 167 788

106 892

75 637 635 530

2 508 332 3 520 2 508 332 23 291

IBA annual report 2009 | 105

IBA S.A. annual financial stat.

APPROPRIATION OF RESULTS (EUR ’000) Loss to be appropriated (-) Profit for the period available for appropriation Loss carried forward (-) Transfers to capital and reserves Transfer from capital and share premium account Transfer from reserves Appropriations to capital and reserves Appropriation to capital and share premium account Appropriation to legal reserve Appropriation to other reserves Profit/(loss) to be carried forward

Corporate governance, management, and control

106 | IBA annual report 2009

1. Board of Directors The Board of Directors is composed of nine members. The articles of incorporation and the Charter require a balance on the Board of Directors among outside directors, inside directors, and directors representing the shareholders. The Board of Directors must always be made up of at least one third outside directors and one third directors nominated by the managing directors (“inside directors”). The two managing directors, who are responsible for the Company’s day-to-day management, are also considered inside directors.

At the proposal of the Nominating Committee, the Ordinary General Meeting of May 13, 2009 approved the reelection of Pierre Scalliet as an outside director, but in the capacity of representative and manager of PSL Management Consulting SCS. It also reelected Olivier Ralet, representing O. Ralet BDM SPRL, as an “other” director. Both of these terms will expire at the 2012 Ordinary General Meeting to approve the financial statements for 2011.

The Board of Directors meets whenever necessary, but a minimum of four times a year. The major topics of discussion include market situation, strategy (particularly as concerns acquisitions during the period), technological developments, financial developments, and human resources management. Reports on topics dealt with at Board meetings are sent to the directors first, so that they can exercise their duties with a full knowledge of the facts. The Board of Directors met seven times in 2009, each time under the chairmanship of Peter Vermeeren. Attendance at meetings of the Board was high. A large majority of the directors attended all meetings. Only eight absences were recorded for all of the meetings, which represents an absentee rate of approximately 12.7 percent. The Company believes that the attendance record of individual directors is not pertinent in the context of this report.

IBA annual report 2009 | 107

Corporate governance

The philosophy, structure, and general principles of IBA corporate governance are presented in the Company’s Corporate Charter (“Charter”). The Charter is available on the Company's website www.iba-worldwide.com. The Company has adopted the 2009 Belgian Code of Corporate Governance as its reference Code.

The Board of Directors was comprised of the following nine members at December 31, 2009: Age

Start of term

End of term

Duties at IBA

Primary duties outside IBA

Pierre Mottet(1)

1998

OGM 2011

Chief Executive Officer Inside director Managing director NC

Member of the Executive Committees of FEB (Federation of Belgian Enterprises) and Agoria Wallonia; Director of UWE (Walloon Union of Companies) and several startups

Yves Jongen(1)

1991

OGM 2010

Chief Research Officer Inside director Managing director NC

Before the establishment of IBA in 1986, Director of the Cyclotron Research Center of the Université Catholique de Louvain (UCL)

Eric de Lamotte (1) representing Bayrime S.A.

2000

OGM 2011

Inside director

Corporate director. Formerly Financial Director of IBA (1991-2000)

Peter Vermeeren(2)

2000

OGM 2011

Chairman of the Board of Directors Outside director CC, NC

Formerly Executive Vice President of Mallinckrodt and Executive Vice President of ADAC

Pierre Scalliet (2) representing PSL Management Consulting SCS

2005

OGM 2012

Outside director

Chief of Service, Oncological Radiotherapy Professor of Clinical Oncology, Université Catholique de Louvain (UCL)

Jean Stephenne (2) representing Innosté S.A.

2000

OGM 2011

Outside director

Since 1998, President and General Manager of Glaxo-SmithKline Biologicals, Belgium Other offices: Member of the Boards of Directors of BESIX, Fortis, GBL, and Nanocy

Jean-Jacques Verdickt (2) representing J.J. Verdickt SPRL

Olivier Ralet representing Olivier Ralet BDM SPRL

2000

OGM 2012

Other director AC

Licentiate of Law Member of the Executive Committee of Atenor Group SA, Belgium

Nicole Destexhe representing Institut National des Radioéléments FUP

1991

OGM 2010

Other director

Financial Director of IRE

Name

CC, NC, AC

CC, NC 2006

OGM 2010

Outside director AC

Chairman of Techspace Aero, Vice Chairman of the Euroclear group, member of the Boards of Directors of Alcatel Bell, the Magotteaux group, Euroclear Bank, Logiver, Bone Therapeutics, and UWE (Walloon Union of Companies)

CC: Compensation Committee – NC: Nominating Committee – AC: Audit Committee (1) As defined in the Charter. (2) These directors were presented to the shareholders as outside candidates at the time of their election. However, other directors may also meet the same independence criteria. During the course of the year, none of the outside directors ceased to meet the requirements for independence, which are reiterated in the Charter.

2. Compensation Committee The Compensation Committee met three times in 2009. A report on each of its meetings was submitted to the Board. Topics of discussion included issues relating to the 2008 bonuses, determination of beneficiaries of the 2009 stock option plan and the 2009 employee share plan, directors’ compensation, and compensation schemes in general. All of the members attended each meeting.

108 | IBA annual report 2009

The Compensation Committee is comprised of Peter Vermeeren, Jean Stéphenne (representing Innosté SA), and Eric de Lamotte (representing Bayrime SA). It is chaired by Peter Vermeeren. Pierre Mottet is invited to attend unless the Committee is deciding on compensation policy or other subjects affecting the managing directors.

The Nominating Committee met twice in 2009 for the purpose of analyzing the areas of expertise needed by the Board of Directors to fill expiring directorship positions and of making proposals in this regard to the Board of Directors. Based on its report, in May 2009 the Board of Directors proposed the reelection of Pierre Scalliet as an outside director, but in the capacity of representative and manager of PSL Management Consulting SCS. It also proposed that Olivier Ralet, representing O. Ralet BDM SPRL, should be reelected as an “other” director.

All of the members attended each meeting. The Nominating Committee consists of five members, including the Chairman of the Board of Directors and a minimum of two outside directors. The Compensation Committee is comprised of Peter Vermeeren, Jean Stéphenne (representing Innosté SA), and Eric de Lamotte (representing Bayrime SA), together with Pierre Mottet and Yves Jongen. It is chaired by Peter Vermeeren.

4. Audit Committee The Audit Committee met four times in 2009, including three times in the presence of the auditors. A report on each of its meetings was submitted to the Board of Directors. The main topics were the annual results for 2008 and analysis of the auditors’ management letter, analysis of the midyear results, oversight of implementation of IFRS accounting principles, examination of the 2010 budget, and oversight of internal audit and risk management. The Company has currently no specific internal audit function. However, a close follow-up and control of the risks that the Company has to cope with is ensured through the intermediary of its management controllers active in each of the

Company's departments. The risks thus identified are reported to the Management Team which submits a report to the Audit Committee and elaborates an appropriate solution together with the Audit Committee and the person in charge of insurance. All of the members attended each meeting. The Committee is currently comprised of three members: Jean-Jacques Verdickt (representative and manager of J.J. Verdickt SPRL), Oliver Ralet (representative and manager of Olivier Ralet BMD SPRL), and Eric de Lamotte (representative and managing director of Bayrime SA). It is chaired by Jean-Jacques Verdickt.

IBA annual report 2009 | 109

Corporate governance

3. Nominating Committee

5. Day-to-day and strategic management The Chief Executive Officer, accompanied by the Chief Financial Officer, makes regular reports to the Board of Directors. The Board of Directors also asked Management Team members or division heads to report to the Board on two occasions: adoption of the strategic plan and adoption of the 2010 budget.

Day-to-day management and corporate responsibility in such matters is delegated to two managing directors, currently Pierre Mottet, Chief Executive Officer, and Yves Jongen, Chief Research Officer. The Chief Executive Officer is specifically responsible for implementing strategy and for day-to-day management and is assisted by a management team consisting of certain members of the corporate team and the presidents of the business units. Together, they constitute the Group’s Management Team. Name

Title

1. Pierre Mottet 2. Yves Jongen 3. Jean-Marc Bothy 4. Jean-Marie Ginion 5. Frank Uytterhaegen 6. Rob Plompen 7. Olivier Legrain 8. Jean-Marc Andral 9. Bernard Reculeau 10. Serge Lamisse 11. Didier Cloquet

Chief Executive Officer Chief Research Officer Chief Financial Officer President Technology Group President IBA China President IBA Dosimetry President IBA Molecular President IBA Particle Therapy President CISBIO Bioassays President IBA Industrial Chief of Staff



 



110 | IBA annual report 2009



The Management Team was comprised of the following members on December 31, 2009:



Age

location

48 62 45 60 56 46 41 60 59 46 45

Louvain-la-Neuve, Belgium Louvain-la-Neuve, Belgium Louvain-la-Neuve, Belgium Louvain-la-Neuve, Belgium Beijing, China Schwarzenbruck, Germany Saclay, France Louvain-la-Neuve, Belgium Saclay, France Louvain-la-Neuve, Belgium Louvain-la-Neuve, Belgium





 



The Board meeting of March 3, 2009, at which the Board was to rule on the Compensation Committee report, gave rise to the application of the procedure stipulated in article 523 of the Belgian Code of Company Law for cases of director conflict of interest. This conflict involved the managing directors as the heads of management companies that provide services to IBA. After deliberation, the Board unanimously adopted the recommendations made by the Compensation Committee in its report to the Board regarding both the strategic objectives assigned to these management companies for 2009 and the determination of variable pay (payfor-performance) for 2009. The managing directors were then informed of the Board’s decision. The Board meeting of April 2, 2009, which was to rule on approving the employee share plan for employees of IBA SA and its Belgian subsidiaries, gave rise to the application of the procedure stipulated in article 523 of the Belgian Code of Company Law for cases of director conflict of interest. This conflict involved the managing directors as beneficiaries of this plan. After deliberation, the Board unanimously approved the terms of the stock purchase plan for employees of IBA SA and its Belgian subsidiaries, as well as the special report prepared by the Board in accordance with article 596 of the Belgian Code of Company Law. The managing directors were then informed of the Board’s decision.

and 2007 stock option plans, gave rise to the application of the procedure stipulated in article 523 of the Belgian Code of Company Law for cases of director conflict of interest. This conflict of interest involved all of the directors as beneficiaries of this extension, with the exception of the Chairman and the Chairman of the Audit Committee. After deliberation, the Board unanimously approved the extension of the 2004, 2005, 2006, and 2007 stock option plans, as proposed by Management, as well as the special reports prepared by the Board in accordance with articles 583, 596, and 598 of the Belgian Code of Company Law. The Board meeting of August 28, 2009, at which the Board was to rule on launching a stock option plan, also gave rise to the application of the procedure stipulated in article 523 of the Belgian Code of Company Law for cases of conflict of interest involving directors. This conflict involved all of the members of the Board as beneficiaries of this plan, with the exception of Nicole Destexhe (Institut National des Radioéléments), Peter Vermeeren, and Jean-Jacques Verdickt (J.J. Verdickt SPRL), who, although eligible to participate in this plan, did not wish to be included in the list of beneficiaries. After deliberation, the Board unanimously approved the launch of a stock option plan allowing for up to 1 000 000 options, as well as the draft of the special report prepared by the Board in accordance with articles 583, 596, and 598 of the Belgian Code of Company Law.

The Board meeting of March 13, 2009, which was to rule on extending the 2004, 2005, 2006,

7. Codes of conduct 7.1 Code of ethical conduct The Company is committed to the honest, ethical, and honorable conduct of its business. It believes that ethical management is the lynchpin of its continued growth and success, will enable it to maintain its good reputation and achieve its

strategic mission of protecting, enhancing, and saving lives. For this reason, it has worked to create a code of ethical conduct. This code defines the fundamental principles of ethical business conduct and provides guidance for the Group’s employees and co-contracting parties on such matters as

IBA annual report 2009 | 111

Corporate governance

6. Conflicts of interest

business partnerships, conflicts of interest, and confidentiality. All employees have read and approved this code. 7.2 Code of conduct to combat insider trading and market abuse The Company has implemented a code of conduct to combat insider trading and market abuse. All employees have received a copy of this code. Furthermore, each of the directors and each member of the management team have signed and acknowledged the code in his or her management capacity. In 2009, these individuals exercised, in their capacity of person holding management duties, a total of 21 000 stock options issued under the 2004 stock option plan.

7.3 Code of conduct for contractual relationships between the Company (including its affiliated companies) and affiliated persons The Company has implemented a code of conduct governing transactions and other contractual relationships between IBA or its affiliated companies and persons affiliated with them. A transaction with an affiliated person is an transaction between the Company or one of its subsidiaries and (a) a member of the Board of Directors of IBA SA, (b) a member of the Group’s Management Team, (c) a person living under the same roof as these individuals, or (d) an enterprise in which a person referred to in (a), (b), or (c) holds significant voting power, whether directly or indirectly. Such transactions must be conducted in accordance with the market practice. This code has been read and signed by all affiliated persons.

To the best of the Company’s knowledge, there were no violations of this code of conduct in 2009.

8. Compensation policy - Stock and stock options As indicated in the Charter, the Company does not wish to provide specific information on individual compensation as long as it is not legally compelled to do so. It believes that information of this kind does not offer added value to the shareholders and is potentially harmful to the Company. However, communication of information on compensation policy is important for shareholders and is detailed in the Charter. Compensation actually paid in 2009 is described below. 8.1. Directors Directors earn a yearly fixed fee amounting to EUR 6 000 increased by EUR 1 000 per meeting they actually attended (EUR 2 000 for the Chairman and EUR 1 500 for the Chairman of the Audit Committee). Fixed compensation paid to members of the Board of Directors for services rendered in 2009 totaled EUR 108 500. Managing directors were not compensated for attending meetings of the Board of Directors. Non-managing directors did not receive any compensation or other direct

112 | IBA annual report 2009

or indirect benefit from the Company or any other entity belonging to the Group for their services. However, with the exception of Nicole Destexhe, Peter Vermeeren, and Jean-Jacques Verdickt (J.J. Verdickt SPRL), all of the directors were included as beneficiaries of the 2009 stock option plan. Because the number of options involved is quite small, the Company believes that granting these options does not interfere with the judgment of the recipient directors. The Company considers that the amount of compensation or other benefits given directly or indirectly to directors by the Company or any other entity in the Group is not relevant to, and therefore not mentioned in, this report. 8.2. Chief Executive Officer, Managing Directors, and Management Team The Board is careful to ensure that the managing directors and the Management Team are compensated for direct and indirect services to the Company in a manner consistent with market

As indicated in the Charter, fixed and variable compensation of the managing directors is determined by the Compensation Committee in accordance with principles approved by the Board. Fixed and variable compensation of the Management Team is reviewed and determined by the Chief Executive Officer. It has been reported to the Compensation Committee and the Board of Directors and discussed by both. The principle of launching of a 2009 stock option plan and the total number of options to be issued were approved by the Board of Directors. The Compensation Committee identified the beneficiaries of the stock options and determined the number of stock options to be granted to each of them. The total amount paid by the Company and all other entities in the Group in compensation for duties exercised and services rendered directly or indirectly by the two managing directors and the nine members of the Management Team came to approximately EUR 3.9 million in 2009: around EUR 2.9 million for fixed compensation and around EUR 1 million for variable compensation. These amounts are always stated as cost to the company. Note that fixed compensation includes a Group contribution of EUR 0.1 million to a defined contribution plan. The Company mentions that no variable compensation will be paid with regards to 2009 as the set objectives have not been met. The Company considers that the amount of compensation or other benefits given directly or indirectly to the Chief Executive Officer by the Company or any other entity in the Group is not relevant to, and therefore not mentioned in, this report. As at December 31, 2009, all of the directors together held 1 508 059 shares of IBA stock directly (including 1 423 271 shares held by IRE).

At the same date, the non-managing directors still held: ➤ 600 IBA stock options granted under the 2001 stock option plan ➤ 600 IBA stock options granted under the 2002 stock option plan ➤ 15 000 IBA stock options granted under the 2006 stock option plan ➤ 6 000 IBA stock options granted under the 2007 stock option plan ➤ 1 000 IBA stock options granted under the 2008 stock option plan ➤ 4 500 IBA stock options granted under the 2009 stock option plan As at December 31, 2009, members of the Management Team, including the managing directors, held a total of 890 052 stock options distributed as follows: ➤ 50 000 options granted under the 2001 stock option plan at the strike price of EUR 12.60 ➤ 255 500 options granted under the 2002 stock option plan at the strike price of EUR 3.34 ➤ 156 500 options granted under the 2004 stock option plan at the strike price of EUR 3.72 ➤ 10 000 options granted under the 2005 stock option plan at the strike price of EUR 6.37 ➤ 124 000 options granted under the 2006 stock option plan at the strike price of EUR 13.64 ➤ 107 261 options granted under the 2007 stock option plan at the strike price of EUR 19.94 ➤ 55 675 options granted under the 2008 stock option plan at the strike price of EUR 14.18 ➤ 131 116 options granted under the 2009 stock option plan at the strike price of EUR 8.26 The Company believes that (i) the number of shares, stock options, or any other option purchase rights granted to the CEO or any other members of executive management during the course of the year and (ii) the principal contract provisions regarding the hiring or departure of executive managers are not relevant to, and therefore not mentioned in, this report. The company notes however that these provisions are in line with the market standards.

IBA annual report 2009 | 113

Corporate governance

practices and based on level of responsibility, services rendered, and nature of duties.

9. Relationship with reference shareholders IBA’s reference shareholders – i.e. Belgian Anchorage SCRL (of which IBA SA and IBA Investments SCRL are affiliate companies), UCL ASBL, Sopartec SA, and IRE FUP- have disclosed that they are acting in concert and have entered into an agreement that will expire in 2013. The above shareholders’ agreement governs, inter alia, the sharing of information and preferential rights on the sale of IBA stock. The parties to this agreement held 10 153 213 shares of common stock at December 31, 2009 (10 864 380 with the affiliate companies of Belgian Anchorage SCRL), representing 38 percent of Company’s voting rights (40.66 percent with the affiliate companies of Belgian Anchorage SCRL).

shareholders does not exercise its preferential subscription right, this right will pass to the other dominant shareholders, with Belgian Anchorage SA having first right of purchase. If a participant in the shareholders’ agreement wishes to sell its shares of IBA stock, the other parties to the agreement will have a preemptive right to acquire this stock, with Belgian Anchorage SA having first right of purchase. This preemptive right is subject to certain exceptions. In particular, it does not apply in the case of a transfer of stock to Belgian Anchorage SA. To the best of the Company’s knowledge, there were no other relationships or specific agreements among the shareholders at December 31, 2009.

Under the terms of this agreement, in the event of a new IBA stock offering, if one of the dominant

10. Legislation governing takeover offers and transparency 10.1 Disclosures required under transparency legislation In accordance with the Act of May 2, 2007 on the disclosure of significant holdings in issuers whose securities are admitted to trading on a regulated market and its implementing royal decree of February 14, 2008 (both effective September 1, 2008), and on the basis of article 34 of the articles of Incorporation of IBA SA, IBA's shareholders are required to report their holdings to the CBFA (Belgium’s financial market regulator) and to IBA SA whenever these holdings reach a threshold of 3 percent, 5 percent, or multiples of 5 percent. IBA SA did not receive any disclosures of this nature in 2009. 10.2 Takeover legislation (transitional regime) Under article 74 of the Takeover Offer Act of April 1, 2007, single or concerted parties that hold more than 30 percent of the voting shares of a Belgian company admitted to trading on a regulated market as of September 1, 2007 are not

114 | IBA annual report 2009

bound by the obligation to make a takeover offer for the stock of said company, subject to certain conditions, including having notified the CBFA in accordance with the applicable regulation and by the prescribed deadlines. In connection with the above, IBA SA acknowledged receipt on October 26, 2009 of notification that the initial disclosures of the indicated companies had been updated as follows: “As of October 1, 2009: ➤ “Belgian Anchorage SA, whose registered office is located at Avenue Charles Madoux 13-15, 1160 Brussels (enterprise number VAT BE 0466.382.136, RLP Brussels), continues to hold 7 773 132 IBA shares, or 29.11 percent of the capital at this date. ➤ “IBA Investments SCRL, whose registered office is located at 3 Chemin du Cyclotron, 1348 Louvain-la-Neuve (enterprise number VAT BE 0874.830.726, RLP Nivelles), has increased its

In view of the above, the affiliated persons disclosure of October 30, 2007, associating Belgian Anchorage SA and IBA Investments SCRL, Situation of denominator

Belgian Anchorage SCRL IBA Investment SCRL IBA S.A. UCL ASBL Sopartec SA Institut des Radioéléments FUP

involved 8 408 662 shares, or 31.49 percent of the capital stock of IBA SA at October 1, 2009. Similarly, as of October 1, 2009, the disclosure of parties acting in concert of February 14, 2008, associating Belgian Anchorage SA, IBA Investments SCRL, and Institut National des Radioéléments FUP, involved 9 831 933 shares, or 36.82 percent of the capital stock of IBA SA at October 1, 2009.” Subsequent events The situation was as follows at December 31, 2009:

December 31, 2009 26 719 155 reference shareholders Number of % shares 7 773 132 29.09% 635 530 2.38% 75 637 0.28% 426 885 1.60% 529 925 1.98% 1 423 271 5.33% 10 864 380 40.66%

acting in concert Number of % shares 7 773 132 29.09%

426 885 529 925 1 423 271 10 153 213

1.60% 1.98% 5.33% 38.00%

affiliated persons A Number of shares A A A

8 484 299

affiliated persons B Number of shares

B B

1.60% 1.98%

956 810

3.58%

29.09% 2.38% 0.28%

31.75%

IBA annual report 2009 | 115

Corporate governance

investment to 635 530 shares, or 2.38 percent of the capital at this date. ➤ “Institut National des Radioéléments FUP, whose registered office is located at Avenue de l’Espérance 1 (enterprise number VAT BE 0408.449.677, RLP Charleroi), continues to hold 1 423 271 shares, or 5.33 percent of the capital at this date.

General information

116 | IBA annual report 2009

Registered office Chemin du Cyclotron, 3 B-1348 Louvain-la-Neuve, Belgium Enterprise number VAT BE 0428.750.985, RLP Nivelles Date, form, and period of incorporation IBA was incorporated for an indefinite period on March 28, 1986 as a société anonyme under Belgian law. It is a listed company pursuant to article 4 of the Belgian Code of Company Law and a company having offered securities to the public pursuant to article 438 of the Belgian Code of Company Law. Corporate purpose (article 3 of the articles of incorporation) The purpose of the Company is to engage in research and development and to acquire intellectual property rights with a view to the exploitation, fabrication, and marketing of applications and equipment in the field of applied physics. It may engage in any and all securities, real-estate, financial, commercial, and industrial operations that are directly or indirectly related to its corporate purpose. It may acquire an interest, by contribution, merger, purchase of shares, or any other means, in companies, partnerships, or corporations whose purpose is similar, analogous, related, or useful to the achievement of its corporate purpose in whole or in part. Consultation of corporate documents The Company’s statutory and consolidated statements are filed with the National Bank of Belgium. Copies of the Company’s consolidated articles of incorporation, its annual and semiannual reports, and all other shareholder documentation may be obtained at the Company’s website (www.iba-worldwide.com) or by shareholder request to the Company’s registered office.

Capital stock At December 31, 2009, IBA’s capital stock was valued at EUR 37 504 503.12 and consisted of 26 719 155 fully paid shares with no par value, including 11 984 565 shares with V VPR strips. In November 2001, the Company issued 500 000 stock options for Group employees (“2001 Plan”). Of these options, 121 100 were canceled by notarial act on July 9, 2002, and 118 375 were canceled by notarial act on July 13, 2004. Most of these stock options allow the beneficiary to purchase a new share at EUR 12.60 following certain procedures during specific periods between December 1, 2002 and December 31, 2010. At December 31, 2009, 123 625 of the 2001 Plan stock options remained outstanding. In September 2002, the Company issued 3 000 000 stock options for Group employees (“2002 Plan”). Of these options, 167 650 were canceled by notarial act on July 17, 2003, 991 750 were canceled by notarial act on July 13, 2004, and 474 220 were canceled by notarial act on July 11, 2005. Most of these stock options allow the beneficiary to purchase a new share at EUR 3.34 following certain procedures during specific periods between December 1, 2003 and August 31, 2012. The following options were exercised in 2009: 120 by notarial act of October 16, 2009. At December 31, 2009, 316 337 of the 2002 Plan stock options remained outstanding. In September 2004, the Company issued 1 000 000 stock options for Group employees (“2004 Plan”). Of these options, 500 000 were awarded free of charge to employees of IBA and its Belgian subsidiaries and Specific Persons subject to the Belgian Employment Action Plan Act of March 26, 1999 (“free stock options”). Another 500 000 of these options were offered at 4 percent of the strike price to employees and Specific Persons not subject to the Belgian Employment Action Plan Act of March 26, 1999 (“purchasable stock options”). This segment was intended essentially for employees and Specific Persons

IBA annual report 2009 | 117

General information

Corporate name Ion Beam Applications SA, abbreviated IBA SA.

associated with subsidiaries of IBA SA in countries outside Belgium, where stock options are taxed when they are exercised rather than when they are granted. In order to distribute the impact of the tax burden on beneficiaries subject the Belgian Employment Action Plan Act, instead of giving these stock options away, the Company issued them at a price approximately equal to the marginal tax rate burden for beneficiaries subject to the Act. Of the total offer, 496 000 free stock options were accepted, and 390 000 purchasable options were purchased. Consequently, 4 000 unaccepted free stock options were canceled, as recorded by notarial act on December 22, 2004. These stock options allow the beneficiary to purchase a new share at EUR 3.72 following certain procedures during specific periods between December 1, 2007 and September 30, 2010. The following options were exercised in 2009: 12 750 by notarial act on January 21, 2009, 350 by notarial act on April 16, 2009, 5 450 by notarial act on July 14, 2009, and 6 550 by notarial act on October 16, 2009. At December 31, 2009, 664 200 of the 2004 Plan stock options remained outstanding. In October 2005, the Company issued 90 000 stock options for Group employees (“2005 Plan”). All of the stock options were accepted. They allow the beneficiary to purchase a new share at EUR 6.37 following certain procedures during specific periods between December 1, 2008 and September 30, 2011. The following options were exercised in 2009: 9 000 by notarial act of October 16, 2009. At December 31, 2009, a total of 81 000 of the 2005 Plan stock options remained outstanding. In October 2006, the Company issued 575 000 stock options for Group employees (“2006 Plan”). The offering was distributed in much the same way as for the 2004 Plan. As recorded by notarial act on December 22, 2006, of the 332 000 free stock options, 287 500 were accepted, and of the 243 000 purchasable stock options, 149 750 were purchased. Consequently, 44 500

118 | IBA annual report 2009

unaccepted free stock options were canceled, as recorded by notarial act. They allow the beneficiary to purchase a new share at EUR 13.64 following certain procedures during specific periods between December 1, 2009 and September 30, 2012. At December 31, 2009, a total of 437 250 of the 2006 Plan stock options remained outstanding. In October 2007, Company issued 450 000 stock options for Group employees (“2007 Plan”). The offering was distributed in much the same way as for the 2004 Plan. As recorded by notarial act on December 20, 2007, of the 259 000 free stock options, 219 788 were accepted, and of the 191 000 purchasable stock options, 118 458 were purchased. Consequently, 39 212 free stock options were canceled, as recorded by notarial act. They allow the beneficiary to purchase a new share at EUR 19.94 following certain procedures during specific periods between December 1, 2010 and September 30, 2013. At December 31, 2008, there were 338 246 stock options from this plan. None of these options was exercisable at that date. In September 2008, the Company issued 350 000 stock options for Group employees (“2008 Plan”). The offering was distributed in much the same way as for the 2004 Plan. As recorded by notarial act on December 18, 2008, of the 200 000 free stock options, 77 283 were accepted, and of the 150 000 purchasable stock options, 38 187 were purchased. Consequently, 122 717 free stock options were canceled, as recorded by notarial act. They allow the beneficiary to purchase a new share at EUR 14.18 following certain procedures during specific periods between December 1, 2011 and September 30, 2014. At December 31, 2009, there were 115 470 stock options from this plan. None of these options was exercisable at that date. In May 2009, as authorized by law, the Board of Directors decided to propose a three-year extension of the exercise periods for free options granted under the 2004, 2005, 2006, and 2007

Thus, at December 31, 2009, 2 511 899 stock options were issued and outstanding. All stock options may also be exercised in the event of a takeover bid for IBA or of a capital increase with preferential rights. In April 2009, the Company offered 200 000 shares for subscription by Group employees (2009 ESP Plan). As recorded by notarial act on May 29, 2009, of the 200 000 new shares offered for purchase, 121 838 were purchased at a price of EUR 4.09 per share. The shares offered for purchase were registered common stock shares of IBA capital stock with V VPR strips and ownership granted as from 2009. They were offered at a purchase price equal to the average market price for 30 days prior to the offer, less a discount of 16.67 percent. The shares may not be sold for three years as from the end of the purchase period.

This authorization is valid for five years from the date of publication in the Moniteur Belge of the decision of the Extraordinary General Meeting of May 14, 2008; that is, until June 10, 2013. At December 31, 2009, following the launch of the 2009 stock option plan, the authorized capital was valued at EUR 23 290 752.01. Patents and technologies IBA is careful to patent all aspects of its technology for which a patent provides a commercial advantage. In addition, the Company has maintained the secrecy of a significant portion of its know-how that is unpatentable or for which the Company believes secrecy is more effective than publication in a patent application. More fundamentally, the Company believes that the best way to protect itself from its competitors is not by patenting its inventions, but by maintaining its technological lead. IBA also licenses patents from third parties and pays royalties on them. Licensing and cooperation agreements IBA has licensing agreements involving various aspects of its technology. Listing and explaining the nature and terms of these licensing agreements is beyond the scope of this annual report. These agreements involve, for example, certain aspects of its particle accelerator technology and a number of components of its proton therapy equipment. Several agreements relate to Bio Assays business. Eventually, more recent agreements were entered into with regards to the future commercialisation of proprietary molecules in medical imagery.

Authorized capital The Extraordinary General Meeting of May 14, 2008 authorized the Board of Directors to increase the Company’s capital through one or more stock offerings up to a maximum of EUR 25 000 000.

IBA annual report 2009 | 119

General information

stock option plans, with certain restrictions applying to persons holding options with a total value of more than EUR 100 000 (calculated as the strike price times the number of options). In September 2009, the Company issued 1 000 000 stock options for Group employees (“2009 Plan”). The offering was distributed in much the same way as for the 2004 Plan. As recorded by notarial act on December 16, 2009, of the 620 000 free stock options, 346 578 were accepted, and of the 380 000 purchasable stock options, 89 193 were purchased. Consequently, 273 422 free stock options were canceled, as recorded by notarial act. They allow the beneficiary to purchase a new share at EUR 8.26 following certain procedures during specific periods between December 1, 2012 and September 30, 2015. At December 31, 2009, there were 435 771 stock options from this plan. None of these options was exercisable at that date.

Five-Year Capital History Shares Transaction 03/23/05 Exercise of options under 2002 stock option plan 02/17/06 Exercise of options under 2002 stock option plan 04/18/06 Exercise of options under 2002 stock option plan 07/14/06 Exercise of options under 2002 stock option plan 10/17/06 Exercise of options under 2002 stock option plan 10/17/06 Exercise of options under 2001 stock option plan 01/15/07 Exercise of options under 2001 stock option plan 01/15/07 Exercise of options under 2002 stock option plan 04/17/07 Exercise of options under 2001 stock option plan 04/17/07 Exercise of options under 2002 stock option plan 07/17/07 Exercise of options under 2001 stock option plan 07/17/07 Exercise of options under 2002 stock option plan 10/16/07 Exercise of options under 2001 stock option plan 10/16/07 Exercise of options under 2002 stock option plan 01/16/2008 Exercise of options under 2001 stock option plan 01/16/2008 Exercise of options under 2002 stock option plan 01/16/2008 Exercise of options under 2004 stock option plan 04/15/08 Exercise of options under 2002 stock option plan 04/15/08 Exercise of options under 2004 stock option plan 06/23/08 Capital increase 07/16/08 Exercise of options under 2001 stock option plan 07/16/08 Exercise of options under 2002 stock option plan 07/16/08 Exercise of options under 2004 stock option plan 10/17/2008 Exercise of options under 2001 stock option plan 10/17/2008 Exercise of options under 2002 stock option plan 10/17/2008 Exercise of options under 2004 stock option plan 01/21/2009 Exercise of options under 2004 stock option plan 04/16/2009 Exercise of options under 2004 stock option plan 05/29/2009 ESP Plan, 2009 07/14/2009 Exercise of options under 2004 stock option plan 10/16/2009 Exercise of options under 2002 stock option plan 10/16/2009 Exercise of options under 2004 stock option plan 10/16/2009 Exercise of options under 2005 stock option plan 01/20/2010 Exercise of options under 2004 stock option plan 01/20/2010 Exercise of options under extended 2004 plan

120 | IBA annual report 2009

Capital (en EUR) New shares

Total shares

Change (â&#x2C6;&#x2020;)

Total

+ 200 000 +350 000 +7 930 +159 823 +87 110 +17 750 +82 550 +118 180 +20 050 +43 280 +10 500 +56 636 +3 350 +640 +1500 +7 270 +143 450 +7 500 +15 500 +544 611 +600 +3 434 +26 900 +600 +630 +10 850 +12 750 +350 +121 838 +5 450 +120 +6 550 +9 000 +55 900 +23 400

24 842 453 25 192 453 25 200 383 25 360 206 25 447 316 25 465 066 25 547 616 25 665 796 25 685 846 25 729 126 25 739 626 25 796 262 25 799 612 25 800 252 25 801 752 25 809 022 25 952 472 25 959 972 25 975 472 26 520 083 26 520 683 26 524 117 26 551 017 26 551 617 26 552 247 26 563 097 26 575 847 26 576 197 26 698 035 26 703 485 26 703 605 26 710 155 26 719 155 26 775 055 26 798 455

+ 278 340 + 487 095 +11 036 +222 426 +121 231 +24 555 +114 197 +164 471 +27 737 +60 233 +14 525 +78 820 +4 634 +891 +2 075 +10 118 +201 447 +10 438 +21 767 +764 447 +830 +4 779 +37 776 +830 +877 +15 237 +17 905 +492 +171 024 +7 653 +167 +9 198 +12 638 +78 500 +32 861

34 882 956 35 370 051 35 381 087 35 603 513 35 724 743 35 749 299 35 863 495 36 027 967 36 055 703 36 115 936 36 130 462 36 209 282 36 213 916 36 214 807 36 216 882 36 227 000 36 428 447 36 438 884 36 460 651 37 225 098 37 225 928 37 230 707 37 268 483 37 269 313 37 270 190 37 285 426 37 303 331 37 303 823 37 474 847 37 482 500,15 37 482 667,15 37 491 865,32 37 504 503,12 37 583 003,49 37 615 864,11

General information IBA annual report 2009 | 121

The stock market and the shareholders IBA stock IBA stock is quoted on the Euronext Brussels continuous market. It is part of the Euronext Brussels Bell Mid index. It was introduced on the Stock Exchange on June 22, 1998 at a price of EUR 11.90 (adjusted for a 5 to 1 split in June, 1999). There were no convertible bonds or warrants issued as of December 31, 2009. During 2009, IBA stock followed the stock markets, closing at EUR 8.45 at the end of December 2009, up slightly compared to the end of 2008. The total number of stock options issued for personnel rose to 2 508 332 at the end of 2009.

Stock market prices

■ Volume ■ Market price

e 10.00

360 000

e 9.00

e 8.00

e 7.00

e 6.00

e 5.00

29 dec 09

8 dec 09

18 nov 09

29 oct 09

8 oct 09

18 sep 09

31 aug 09

11 aug 09

22 jul 09

2 jul 09

12 june 09

25 may 09

5 may 09

14 apr 09

23 mar 09

3 mar 09

11 feb 09

22 jan 09

2 jan 09

e 4.00

122 | IBA annual report 2009

28 dec 09

13 dec 09

28 nov 09

13 nov 09

29 oct 09

14 oct 09

29 sep 09

14 sep 09

30 aug 09

15 aug 09

31 jul 09

16 jul 09

1 jul 09

16 june 09

1 june 09

17 may 09

2 may 09

17 apr 09

2 apr 09

18 mar 09

3 mar 09

16 feb 09

1 feb 09

27 jan 09

■ IBA ■ Bel Mid ■ BEL 20

2 jan 09

47% 0,47 37% 0,37 27% 0,27 17% 0,17 7% 0,07 -3% -0,03 -13% -0,13 -23% -0,23 -33% -0,33 -43% -0,43

400000 360000 320 000 320000 280 000 280000 240 000 240000 200 000 200000 160 000 160000 120 000 120000 80 000 80000 40 000 40000 0 0 400 000

e 11.00

Belgian Anchorage S.A.(1)(2) Institut des Radioéléments (IRE)(1) Sopartec (UCL)(1) Université Catholique de Louvain (UCL)(1) IBA Investments(3) IBA S.A. Float TOTAL

Diluted Number of shares

December 31, 2009 Number of shares %

Diluted Number of shares

7 773 132 1 423 271

29.26% 5.36%

7 773 132 1 423 271

26.95% 4.93%

7 773 132 1 423 271

29.09% 5.33%

7 773 132 1 423 271

29.09% 5.33%

529 925 426 885

1.99% 1.61%

529 925 426 885

1.84% 1.48%

529 925 426 885

1.98% 1.60%

529 925 426 885

1.98% 1.60%

433 692

1.63%

433 692

1.50%

15 976 192 60.14% 26 563 097 100.00%

18 253 688 63.29% 28 840 593 100.00%

635 530 2.38% 75 637 0.28% 15 854 775 59.34% 26 719 155 100.00%

635 530 2.38% 75 637 0.28% 18 363 107 68.73% 29 227 487 100.00%

(1) Transparency statement at October 26, 2009 (most recent published statement). (2) Belgian Anchorage is a company established and wholly owned by IBA management and employees. (3) IBA Investments is a second-tier subsidiary of IBA S.A.

Shareholder schedule Interim statements, first quarter 2010 2010 Annual Shareholder's Meeting Publication of the semi-annual results as of June 30, 2010 Interim statements, third quarter 2010 Publication of the annual results on December 31, 2010

May 11, 2010 May 12, 2010 at 10:00 a.m. August 31, 2010 November 20, 2010 March 15, 2011

IBA annual report 2009 | 123

The stock market and ...

Shareholders

December 31, 2008 Number of shares %

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124 | IBA annual report 2009

Strengthened to take on the future Annual report 2009

Jean-Marc Bothy Chief Financial Officer Ph.: +32 10 47 58 90 E-mail: investorrelations@iba-group.com Version franĂ§aise disponible sur demande.

IBA Group | 2010 | AR2009

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IBA Annual report 2009

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